<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-36595-01
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN DECLARED EFFECTIVE
BY THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO SECTION 8(A) OF THE
SECURITIES ACT OF 1933. A FINAL PRICING SUPPLEMENT, THE ACCOMPANYING PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES WILL BE DELIVERED TO
PURCHASERS OF THESE SECURITIES. NEITHER THIS PRICING SUPPLEMENT, THE
ACCOMPANYING PROSPECTUS SUPPLEMENT NOR THE PROSPECTUS TO WHICH IT RELATES SHALL
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PRICING SUPPLEMENT DATED MARCH 6, 1998
PRICING SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 20, 1997
AND PROSPECTUS SUPPLEMENT DATED OCTOBER 31, 1997)
$100,000,000
POST APARTMENT HOMES, L.P.
% MANDATORY PAR PUT REMARKETED SECURITIES(SM)("MOPPRS(SM)")
DUE MARCH , 2015
---------------------
[POST PROPERTIES LOGO]
Post Apartment Homes, L.P. (the "Operating Partnership") is offering
$100,000,000 in aggregate principal amount of its % Mandatory Par Put
Remarketed Securities(SM)("MOPPRS(SM)") due March , 2015. The annual
interest rate on the MOPPRS to March , 2005 (the "Remarketing Date") is
%. THE MOPPRS ARE SUBJECT TO MANDATORY TENDER ON THE REMARKETING DATE. If
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Remarketing Dealer (the
"Remarketing Dealer"), has elected to remarket the MOPPRS as described herein,
the MOPPRS will be subject to mandatory tender to the Remarketing Dealer at 100%
of the principal amount thereof for remarketing on the Remarketing Date, except
in the limited circumstances described herein. See "Description of the
MOPPRS -- Tender of MOPPRS; Remarketing." If the Remarketing Dealer for any
reason does not purchase all tendered MOPPRS on the Remarketing Date or elects
not to remarket the MOPPRS, or in certain other limited circumstances described
herein, the Operating Partnership will be required to repurchase the MOPPRS from
the beneficial owners ("Beneficial Owners") thereof at 100% of the principal
amount thereof plus accrued interest, if any. See "Description of the MOPPRS --
Repurchase."
The MOPPRS are part of the Medium-Term Note series of the Operating
Partnership described in the accompanying Prospectus Supplement, dated October
31, 1997 (the "Prospectus Supplement"), and the accompanying Prospectus, dated
October 20, 1997 (the "Prospectus"). Interest on the MOPPRS is payable
semiannually on and of each year, commencing , 1998.
Except in the limited circumstances described herein, the MOPPRS are not subject
to redemption by the Operating Partnership prior to their Stated Maturity Date
(as defined below). See "Description of the MOPPRS -- Redemption."
Ownership of the MOPPRS will be maintained in book-entry form by or through
The Depository Trust Company ("DTC"). Interests in the MOPPRS will be shown on,
and transfers thereof will be effected only through, records maintained by DTC
and its participants. Beneficial Owners of the MOPPRS will not have the right to
receive physical certificates evidencing their ownership except under the
limited circumstances described herein. Settlement for the MOPPRS will be made
in immediately available funds. The secondary market trading activity in the
MOPPRS will therefore settle in immediately available funds. All payments of
principal and interest on the MOPPRS will be made by the Operating Partnership
in immediately available funds so long as the MOPPRS are maintained in
book-entry form. Beneficial interests in the MOPPRS may be acquired, or
subsequently transferred, only in denominations of $1,000 and integral multiples
thereof.
SEE "RISK FACTORS" BEGINNING ON PAGE S-2 OF THE PROSPECTUS SUPPLEMENT FOR A
DISCUSSION OF RISK FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE MOPPRS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PRICING SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------
The MOPPRS will be sold to the public at varying prices relating to
prevailing market prices at the time of resale to be determined by the
applicable Underwriter at the time of each sale. The net proceeds to the
Operating Partnership will be % of the principal amount of the MOPPRS sold
and the aggregate proceeds will be $ , plus accrued interest, if any,
from March , 1998. Expenses payable by the Operating Partnership for the
offering are estimated at $ . For further information with respect to the
plan of distribution, see "Supplemental Plan of Distribution."
The MOPPRS are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them and subject to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the MOPPRS will be made through the book-entry facilities of DTC on
or about March , 1998.
---------------------
MERRILL LYNCH & CO. NATIONSBANC MONTGOMERY SECURITIES LLC
---------------------
The date of this Pricing Supplement is March , 1998.
- ---------------
"MandatOry Par Put Remarketed Securities(SM)" and "MOPPRS(SM)" are service marks
owned by Merrill Lynch & Co., Inc.
<PAGE> 2
THE OPERATING PARTNERSHIP'S PRIMARY MARKETS
[PRIMARY MARKETS MAP]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE MOPPRS. SUCH TRANSACTIONS MAY
INCLUDE OVER-ALLOTMENT TRANSACTIONS AND THE PURCHASE OF MOPPRS TO COVER THE
UNDERWRITERS' SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"SUPPLEMENTAL PLAN OF DISTRIBUTION."
PS-2
<PAGE> 3
PRICING SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
descriptions and the financial information and statements appearing elsewhere
and incorporated by reference in this Pricing Supplement and the accompanying
Prospectus Supplement and the Prospectus. The offering of the MOPPRS pursuant to
this Pricing Supplement and accompanying Prospectus Supplement and Prospectus is
referred to herein as the "Offering." As used herein, the term "Operating
Partnership" includes Post Apartment Homes, L.P., its subsidiaries and its
predecessors, and the term "Company" includes Post Properties, Inc., its
subsidiaries and its predecessors, unless the context indicates otherwise.
THE OPERATING PARTNERSHIP
The Operating Partnership is one of the largest developers and operators of
upscale multifamily apartment communities in the Southeastern and Southwestern
United States. The Operating Partnership currently owns 78 stabilized
communities (the "Communities") containing 25,938 apartment units located
primarily in metropolitan Atlanta, Georgia, Dallas, Texas and Tampa, Florida. In
addition, the Operating Partnership currently has under construction or in
initial lease-up 13 new communities and additions to three existing communities
in the Atlanta, Georgia, Dallas and Houston, Texas, Tampa, Florida, Denver,
Colorado and Nashville, Tennessee metropolitan areas that will contain an
aggregate of 4,945 apartment units upon completion. For the year ended December
31, 1997, the average economic occupancy rate (gross potential rent less vacancy
losses, model expenses and bad debt divided by gross potential rent) of the 45
Communities stabilized for the entire year was 94.9%. The average monthly rental
rate per apartment unit at these Communities for December 1997 was $811. The
Operating Partnership also manages through affiliates approximately 10,000
additional apartment units owned by third parties. The Operating Partnership is
a fully-integrated organization with multifamily development, acquisition,
operation and asset management expertise and has approximately 1,600 employees.
Post Properties, Inc. (the "Company"), a self-administered and self-managed
equity real estate investment trust (a "REIT"), through wholly owned
subsidiaries, is the sole general partner of, and controls a majority of the
limited partnership interests in, the Operating Partnership. The Company
conducts all of its business through the Operating Partnership and its
subsidiaries.
Since it began doing business in 1971, the Operating Partnership has
pursued three distinctive core business strategies that, for over 25 years, have
remained substantially unchanged:
- Investment Building. Investment building means taking a long-term
view of the assets the Operating Partnership creates. The Operating
Partnership develops communities with the intention of operating them
for periods that are relatively long by the standards of the apartment
industry. Key elements of the Operating Partnership's investment
building strategy include instilling a disciplined team approach to
development decisions; selecting sites in niche and infill locations in
strong primary markets; consistently constructing new apartment
communities with a uniformly high quality and conducting ongoing
property improvements.
- Promotion of the Post(R) Brand Name. The Post(R) brand name strategy
has been integral to the success of the Operating Partnership and, to
the knowledge of the Operating Partnership, has not been successfully
duplicated within the multifamily real estate industry in any major
U.S. market. For such a strategy to work, a company must develop and
implement systems to achieve uniformly high quality and value
throughout its operations. As a result of the Operating Partnership's
efforts in developing and maintaining its communities, the Operating
Partnership believes that the Post(R) brand name is synonymous with
quality upscale apartment communities that are situated in desirable
locations and provide superior resident service. Key elements in
implementing the Operating Partnership's brand name strategy include
extensively utilizing the trademarked brand name; adhering to quality
in all aspects of the Operating Partnership's operations; developing
and implementing leading edge training programs and coordinating the
Operating Partnership's advertising programs to increase brand name
recognition.
PS-3
<PAGE> 4
- Service Orientation. The Operating Partnership's mission statement
is: "To provide the superior apartment living experience for our
residents." By striving to provide a superior product and superior
service, the Operating Partnership believes that it will be able to
achieve its long-term goals. The Operating Partnership believes that it
provides its residents with a superior product and superior service
through its uniformly high quality construction, award-winning
landscaping and numerous amenities, including on-site business centers,
on-site courtesy officers, urban vegetable gardens and state-of-the-art
fitness centers.
The Operating Partnership believes that with the implementation of these
strategies, multifamily properties in its primary markets have the potential
over the long term to provide investment returns that exceed national averages.
According to recent market surveys, employment growth, population growth and
household formation growth in the Operating Partnership's primary markets have
exceeded, and are forecasted to continue to exceed, national averages. See
"Business and Properties -- Multifamily Properties in the Operating
Partnership's Primary Markets."
THE COMMUNITIES
The Communities consist of 78 stabilized Post(R) multifamily apartment
communities located in the following metropolitan areas:
<TABLE>
<CAPTION>
METROPOLITAN AREA COMMUNITIES # OF UNITS % OF TOTAL
- ----------------- ----------- ---------- ----------
<S> <C> <C> <C>
Atlanta, GA................................................ 36 13,768 53.1%
Dallas, TX................................................. 24 6,021 23.2
Tampa, FL.................................................. 8 2,570 9.9
Nashville, TN.............................................. 2 246 1.0
Charlotte, NC.............................................. 1 402 1.5
Other...................................................... 7 2,931 11.3
-- ------ -----
78 25,938 100.0%
== ====== =====
</TABLE>
The Operating Partnership or its predecessors developed all but 14 of the
Post(R) Communities and currently manages all of the Communities. Forty-four of
the Communities have in excess of 300 apartment units, with the largest
Community having a total of 907 apartment units. Sixty-nine of the 78
Communities, comprising approximately 92% of such Communities' apartment units,
were completed after January 1, 1986. The average age of the Operating
Partnership's Communities is approximately seven years.
RECENT DEVELOPMENTS
YEAR AND QUARTER ENDED DECEMBER 31, 1997 FINANCIAL RESULTS
The Operating Partnership's Funds from Operations ("FFO") for the fourth
quarter of 1997 totaled $27.29 million, an increase of 41.9% over the fourth
quarter of 1996. FFO for the year ended December 31, 1997 totaled $87.39
million, an increase of 17.8% over FFO for 1996. The weighted average number of
units of limited partnership interest ("Units") outstanding for the quarter and
year ended December 31, 1997 was 33,722,727 and 28,880,928, respectively.
The Operating Partnership's fourth quarter 1997 net income available to
common unitholders was $16.46 million or $0.49 per common Unit. These per Unit
results are the same as those achieved in the fourth quarter of 1996,
notwithstanding an increase during 1997 in depreciation resulting from assets
obtained in the merger with Columbus Realty Trust ("Columbus"), and a one-time
charge in 1997 of $1.5 million for the relocation of the Operating Partnership's
corporate offices.
For the year ended December 31, 1997, the Operating Partnership's net
income available to common unitholders was $61.08 million or $2.11 per common
Unit, an 8% increase over the per common Unit results for 1996.
PS-4
<PAGE> 5
Earnings comparisons between 1997 and 1996 are affected by Olympics-related
income during 1996. During the third quarter of 1996, the Operating Partnership
recorded FFO and net income of approximately $525,000, or $0.02 per common Unit,
related to the Operating Partnership's Olympic initiatives. Eliminating the
impact of the Olympics-related income in 1996, net income per common Unit was up
by 9% for 1997.
The average economic occupancy rate for the Communities stabilized for all
of 1996 and all of 1997 ("Fully Stabilized Communities") was 95.5% for the
fourth quarter of 1997, up 1.6% over the same quarter of 1996. The average
economic occupancy rate for Fully Stabilized Communities was 94.8% for the year
ended December 31, 1997, down 0.6% from the year ended December 31, 1996.
Total revenue from Fully Stabilized Communities was up 2.6% during the 1997
fourth quarter compared to the 1996 fourth quarter, while operating expenses for
these Communities decreased 0.3%. Consequently, net operating income from Fully
Stabilized Communities increased 4%.
Total revenue for Fully Stabilized Communities was up 1.3% for the year
ended December 31, 1997 over 1996, while operating expenses were up 0.3%. This
resulted in an increase of 1.7% in net operating income from Fully Stabilized
Communities for the year ended December 31, 1997.
Results for the fourth quarter and year ended December 31, 1997 and 1996
are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------- ------------------------
1997(1) 1996 1997(1) 1996
----------- ----------- ----------- ----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING DATA
Revenue:
Rental -- owned properties............................ $ 58,138 $ 41,208 $ 186,126 $ 158,618
Property management -- third party.................... 725 640 2,421 2,828
Landscape services -- third party..................... 1,328 1,414 5,120 4,834
Interest.............................................. 59 37 89 326
Other................................................. 1,672 1,036 6,360 4,969
---------- ---------- ---------- ----------
Total revenue.................................. 61,922 44,335 200,116 171,575
---------- ---------- ---------- ----------
Property operating and maintenance expenses -- owned
properties.......................................... 20,153 14,663 67,519 58,202
Depreciation -- real estate assets.................... 9,094 6,003 27,991 22,676
Depreciation -- non-real estate assets................ 299 217 1,057 927
Property management expenses -- third party........... 654 447 1,956 2,055
Landscape services expenses -- third party............ 1,167 1,054 4,284 3,917
Interest expense...................................... 7,936 5,393 24,658 22,131
Amortization of deferred loan costs................... 233 327 980 1,352
General and administrative expenses................... 2,463 1,930 7,363 7,716
---------- ---------- ---------- ----------
Total expenses................................. 41,999 30,034 135,808 118,976
---------- ---------- ---------- ----------
Net income before net gain (loss) on sale of assets,
loss on relocation of corporate office and
extraordinary item.................................. $ 19,923 $ 14,301 $ 64,308 $ 52,599
Net gain (loss) on sale of assets..................... (242) -- 3,270 854
Loss on relocation of corporate office................ (1,500) -- (1,500) --
---------- ---------- ---------- ----------
Net income before extraordinary item.................. 18,181 14,301 66,078 53,453
Extraordinary item(2)................................. -- -- (93) --
---------- ---------- ---------- ----------
Net income.............................................. 18,181 14,301 65,985 53,453
Distributions to preferred unitholders.................. (1,720) (1,063) (4,907) (1,063)
---------- ---------- ---------- ----------
Net income available to common unitholders.............. $ 16,461 $ 13,238 $ 61,078 $ 52,390
---------- ---------- ---------- ----------
</TABLE>
PS-5
<PAGE> 6
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- ----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA
Real estate, before accumulated depreciation.............. $1,936,011 $1,109,342
Real estate, after accumulated depreciation............... 1,734,916 931,670
Total assets.............................................. 1,780,563 958,675
Total debt................................................ 821,209 434,319
Partners' equity.......................................... 869,304 482,434
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------- ------------------------
1997 1996 1997 1996
----------- ----------- ----------- ----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OTHER DATA
Cash flow provided by (used in):
Operating activities.................................. $ 28,463 $ 11,278 $ 109,554 $ 78,966
Investing activities.................................. $ (99,006) $ (32,769) $ (208,377) $ (166,762)
Financing activities.................................. $ 78,803 $ 15,747 $ 109,469 $ 79,021
Funds from Operations(3)................................ $ 27,297 $ 19,241 $ 87,392 $ 74,212
EBIDA(4)................................................ $ 37,485 $ 26,241 $ 118,994 $ 99,685
Ratio of earnings to combined fixed charges and
preferred unit distributions(5)....................... 3.8x 3.9x 3.9x 4.1x
Ratio of FFO before fixed charges to fixed charges(6)... 4.3x 4.4x 4.4x 4.2x
</TABLE>
- ---------------
(1) Information for the three and twelve months ended December 31, 1997 includes
the operations of Columbus from the date of acquisition on October 24, 1997.
(2) The extraordinary item for the twelve months ended December 31, 1997
resulted from the costs associated with the early extinguishment of
indebtedness.
(3) The Operating Partnership uses the National Association of Real Estate
Investment Trusts, Inc. ("NAREIT") definition of Funds from Operations,
which became effective for periods beginning after January 1, 1996. FFO for
any period means the consolidated net income of the Operating Partnership
and its subsidiaries for such period excluding gains or losses from debt
restructuring and sales of property, plus depreciation of real estate
assets, and after adjustment for unconsolidated partnerships and joint
ventures, all determined in accordance with generally accepted accounting
principles ("GAAP"). FFO presented herein is not necessarily comparable to
FFO presented by other real estate companies due to the fact that not all
real estate companies use the same definition. However, the Operating
Partnership's FFO is comparable to the FFO of real estate companies that use
the current NAREIT definition. FFO should not be considered as an
alternative to net income (determined in accordance with GAAP) as an
indicator of the Operating Partnership's financial performance or to cash
flow from operating activities (determined in accordance with GAAP) as a
measure of the Operating Partnership's liquidity, nor is it necessarily
indicative of sufficient cash flow to fund all of the Operating
Partnership's needs or ability to service indebtedness or make
distributions.
(4) EBIDA means earnings before interest expense, depreciation and amortization.
EBIDA is computed as income before extraordinary item plus interest expense,
depreciation and amortization. The Operating Partnership believes that in
addition to cash flows and net income, EBIDA is a useful financial
performance measurement for assessing its operating performance because,
together with net income and cash flows, EBIDA provides investors with an
additional basis to evaluate its ability to incur and service debt and to
fund acquisitions and other capital expenditures. To evaluate EBIDA and the
trends it depicts, the components of EBIDA, such as rental revenues, rental
expenses, real estate taxes and general and administrative expenses, should
be considered. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" incorporated by reference in the
accompanying Prospectus. Excluded from EBIDA are financing costs such as
interest as well as depreciation and amortization, each of which can
significantly affect the Operating Partnership's results of operations and
liquidity and should be considered in evaluating its operating performance.
Further, EBIDA does not represent net income or cash flows from operating,
financing and investing activities as defined by GAAP and does not
necessarily indicate that cash flows will be sufficient to fund cash needs.
It should not be considered as an alternative to net income as an indicator
of the Operating Partnership's operating performance or to cash flows as a
measure of liquidity.
(5) The ratio of earnings to combined fixed charges and preferred unit
distributions is computed as income from operations before extraordinary
items plus fixed charges (excluding capitalized interest) divided by fixed
charges and preferred unit distributions. Fixed charges and preferred unit
dividends consist of interest costs, including amortization and debt
discount and deferred financing fees, whether capitalized or expensed, plus
any distributions on outstanding preferred units.
(6) The ratio of FFO before fixed charges is calculated as FFO plus fixed
charges (consisting primarily of interest expense), excluding amortization
of debt discount and deferred financing fees divided by fixed charges. The
Operating Partnership believes that in addition to the ratio of earnings to
fixed charges, this ratio provides a useful measure of its ability to
service its debt because of the exclusion of non-cash items such as
depreciation and amortization from the definition of FFO. This ratio differs
from a GAAP-based ratio of earnings to fixed charges and should not be
considered as an alternative to that ratio.
MERGER WITH COLUMBUS REALTY TRUST
On October 24, 1997, Columbus, a Texas real estate investment trust, was
merged into a wholly owned subsidiary of the Company (the "Merger"). At the time
of the Merger, Columbus operated 26 completed communities containing 6,296
apartment units, and had an additional five communities under development
PS-6
<PAGE> 7
that will contain 1,243 apartment units upon completion. The communities are
located primarily in Dallas, Texas. Pursuant to the merger agreement, each
outstanding share of Columbus common stock was converted into .615 shares of
common stock of the Company (the "Common Stock"), which resulted in the issuance
of approximately 8.4 million shares of Common Stock. The Operating Partnership
also assumed approximately $262 million of debt in connection with the Merger,
resulting in a value for the overall transaction of approximately $600 million.
All of the assets and liabilities acquired from Columbus were contributed by the
Company to the Operating Partnership in exchange for Units. The Merger was
structured as a tax-free merger transaction and was treated as a purchase for
accounting purposes. Robert L. Shaw, the former Chief Executive Officer of
Columbus, became a director of the Company and President of the Company's
Western Division ("Post West"). Post West, headquartered in Dallas, Texas,
develops and manages the Operating Partnership's communities west of the
Mississippi River.
Among the strategic reasons the Company pursued and consummated the Merger
were:
- Skilled Development and Operating Team. In seeking to merge with
Columbus, the Company was attracted to the skilled development team led
by Robert Shaw. The Columbus team possesses a unique set of skills in
developing an urbanized, high-density multifamily product often in
collaboration with, and with the financial support of, affected
municipalities.
- High Quality Comparable Assets. Both companies focus on developing in
niche and infill locations in urban settings within high growth
markets, rather than pursuing commodity-oriented locations or
acquisitions. Both companies also provide a high quality, upscale,
highly amenitized product to a resident who places a premium on
location, amenities and a high level of service.
- Portfolio Diversification. The Columbus portfolio gives the Operating
Partnership a critical mass in Dallas, Texas and also provides the
Operating Partnership with access to other high growth, infill urban
settings in the Southwest. Coupling the Operating Partnership's prior
markets with those of Columbus diversifies the economic risk for the
holders of the Company's common and preferred stock and the Operating
Partnership's debt.
- Attractive "Pipeline." At the time of the Merger, Columbus had a
substantial and attractive pipeline of development opportunities which
had been generated as a result of years of investigation and
pre-development work. The Operating Partnership believes that this
pipeline of attractive opportunities would be difficult to reproduce
without substantial time and expense. Since the Merger in October 1997,
the Operating Partnership has in fact started development on four of
these communities which will contain 1,620 units upon completion and
represent a capital investment of approximately $167 million. In
addition, the Operating Partnership is continuing to pursue projects in
Dallas, Houston, Forth Worth and Austin, Texas, Phoenix, Arizona,
Denver, Colorado and other locations which had been initiated by
Columbus.
The Merger also had several ancillary benefits to the Company and the
Operating Partnership:
- Increased Market Capitalization and Improved Liquidity. The total
market capitalization of the Company was increased to approximately
$2.4 billion (as of December 31, 1997) with total shares and Units
outstanding increased to approximately 35,850,000. As a result of this
increase in market capitalization, the 90-day average trading volume of
the Common Stock, which was 44,722 shares at June 30, 1997, increased
82% to 81,180 shares at December 31, 1997. This represents an average
daily trading volume of approximately $3.3 million based on the
December 31, 1997 closing price. The Company believes this increased
market capitalization and liquidity broadens the institutional
following of the Common Stock.
- Elimination of a Competitor. As the Operating Partnership looked to
take its strategy further west from its core southeastern markets and
Columbus sought to expand to the east, the companies were increasingly
finding themselves competing for development opportunities. Through the
Merger, the Operating Partnership eliminated its principal competitor
for urban infill development opportunities.
PS-7
<PAGE> 8
CURRENT DEVELOPMENT ACTIVITY
The Operating Partnership currently has under construction or in initial
lease-up 13 new communities and additions to three existing communities that
will contain an aggregate of 4,945 units upon completion. The Operating
Partnership's communities under development or in initial lease-up are
summarized in the following table:
<TABLE>
<CAPTION>
ACTUAL OR UNITS
ACTUAL OR ESTIMATED LEASED
QUARTER OF ESTIMATED QUARTER OF AS OF
# OF CONSTRUCTION QUARTER FIRST STABILIZED FEBRUARY 28,
METROPOLITAN AREA UNITS COMMENCEMENT UNITS AVAILABLE OCCUPANCY 1998
- ----------------- ----- ------------ --------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
ATLANTA, GA
Post Lindbergh(TM)...................... 395 3Q'96 4Q'97 1Q'99 131
Post Gardens(R)......................... 397 3Q'96 4Q'97 1Q'99 128
Riverside by Post(TM)................... 537 3Q'96 2Q'98 1Q'00 N/A
Post Ridge(TM).......................... 232 1Q'97 4Q'97 4Q'98 55
Post River(R) -- Phase II............... 88 1Q'97 1Q'98 2Q'98 18
Post Briarcliff(TM) -- Phase I.......... 388 2Q'97 2Q'98 3Q'99 N/A
----- ------------
2,037 332
----- ------------
DALLAS, TX
Heights of State Thomas................. 198 4Q'96 4Q'97 2Q'98 141
American Beauty Mill.................... 81 2Q'97 2Q'98 3Q'98 30
Addison Circle Apartment Homes by
Post(TM) -- Phase II.................. 471 4Q'97 4Q'98 1Q'00 N/A
Block 580............................... 203 4Q'97 4Q'98 2Q'99 N/A
----- ------------
953 171
----- ------------
HOUSTON, TX
The Rice................................ 312 1Q'97 2Q'98 4Q'98 178
Midtown -- Phase I...................... 479 4Q'97 1Q'99 4Q'99 N/A
----- ------------
791 178
----- ------------
TAMPA, FL
Post Rocky Point(R) -- Phase III........ 290 2Q'97 2Q'98 1Q'99 9
Post Harbour Island(TM)................. 206 3Q'97 3Q'98 2Q'99 N/A
----- ------------
496 9
----- ------------
DENVER, CO
Post Apartment Homes of Uptown.......... 467 4Q'97 1Q'99 1Q'00 N/A
----- ------------
NASHVILLE, TN
Post Hillsboro Village(TM).............. 201 1Q'97 3Q'97 2Q'98 161
----- ------------
4,945 851
===== ============
</TABLE>
The Operating Partnership is also currently conducting feasibility and
other pre-development studies for possible new Post(R) communities in its
primary market areas.
FINANCING ACTIVITY
On October 20, 1997, the Operating Partnership increased the amount
available under its program for the sale of Medium-Term Notes due nine months or
more from date of issue ("MTNs") to up to $344 million.
On October 28, 1997, the Company sold 2,000,000 non-convertible 7 5/8%
Series B Cumulative Redeemable Preferred Shares (the "Series B Preferred
Shares") with a liquidation preference equivalent to $25 per share. Net proceeds
of $48.3 million from the sale of the Series B Preferred Shares were contributed
to the
PS-8
<PAGE> 9
Operating Partnership in exchange for 2,000,000 Series B Preferred Units and
used by the Operating Partnership to repay outstanding indebtedness under its
syndicated line of credit (the "Revolver").
On November 21, 1997, the Operating Partnership closed an aggregate of $132
million in bridge loans (the "Bridge Loans") with three commercial banks. These
loans bear interest at the London Interbank Offered Rate ("LIBOR") plus 1.04%
for the first 30 days. From December 21, 1997 through maturity on May 20, 1998,
these Bridge Loans bear interest at LIBOR plus 0.92%. Proceeds from these Bridge
Loans were used to pay off debt assumed in the Merger.
On December 17, 1997, the Operating Partnership added two banks to its
Revolver, increasing its capacity from $180 million to $200 million. At the time
of the increase, the Operating Partnership also increased the amount available
under its money market competitive bid option for short-term loans from $90
million to $100 million. This feature allows the Operating Partnership to borrow
at rates below the stated line rates.
On January 1, 1998, the Post Vista, Post F&M Villages and Post Lake
(Orlando) bonds (all of which had previously been economically defeased) were
refunded in the amounts of $21.5 million, $26 million and $28.5 million
respectively, with issues enhanced by Fannie Mae and maturing on June 1, 2025
(the "Tax-Exempt Bond Refunding"). Proceeds from these reissuances, which
totaled $76 million, were used to reduce outstanding balances on the Bridge
Loans ($61.0 million) and the Revolver ($15.0 million).
On February 9, 1998, the Company sold 2,000,000 non-convertible 7 5/8%
Series C Cumulative Redeemable Preferred Shares (the "Series C Preferred
Shares") with a liquidation preference equivalent to $25 per share (the
"Preferred Offering"). Net proceeds of $48.3 million from the sale of the Series
C Preferred Shares were contributed to the Operating Partnership in exchange for
2,000,000 Series C Preferred Units and used by the Operating Partnership to
repay outstanding indebtedness under the Revolver.
On February 13, 1998, the Operating Partnership re-advanced $25 million on
one of its Bridge Loans which had previously been paid down.
On March 4, 1998, the Company sold 3,500,000 shares of Common Stock (the
"Common Share Offering"). Net proceeds of $129.2 million from the sale of the
Common Stock were contributed to the Operating Partnership in exchange for
3,500,000 Units and used by the Operating Partnership to repay in full the
Bridge Loans and to repay other outstanding indebtedness under the Revolver.
THE OFFERING
For a more complete description of the MOPPRS specified in the following
summary, including definitions of capitalized terms not otherwise found, see
"Description of the MOPPRS" in this Pricing Supplement, "Description of Notes"
in the accompanying Prospectus Supplement and "Description of Debt Securities"
in the Prospectus.
Securities Offered......... $100,000,000 aggregate principal amount of %
MandatOry Par Put Remarketed Securities ("MOPPRS")
due March , 2015.
Maturity................... The Stated Maturity Date of the MOPPRS is March ,
2015.
Mandatory Tender of
MOPPRS; Remarketing
and Repurchase........... Provided that the Remarketing Dealer gives notice
to the Operating Partnership and the Trustee on a
Business Day not later than five Business Days
prior to the Remarketing Date of its intention to
purchase the MOPPRS for remarketing, each MOPPRS
will be automatically tendered, or deemed tendered,
to the Remarketing Dealer for purchase on the
Remarketing Date, except in the circumstances
described under "Description of the
MOPPRS -- Repurchase" or "-- Redemption."
PS-9
<PAGE> 10
The purchase price to be paid by the Remarketing
Dealer for the tendered MOPPRS will equal 100% of
the principal amount thereof. When the MOPPRS are
tendered for remarketing, the Remarketing Dealer
may remarket the MOPPRS for its own account at
varying prices to be determined by the Remarketing
Dealer at the time of each sale. If the Remarketing
Dealer for any reason does not purchase all
tendered MOPPRS on the Remarketing Date or elects
not to remarket the MOPPRS, or in certain other
limited circumstances described herein, the
Operating Partnership will be required to
repurchase the MOPPRS from the Beneficial Owners
thereof on the Remarketing Date, at 100% of the
principal amount thereof plus accrued and unpaid
interest, if any. See "Description of the
MOPPRS -- Repurchase."
Optional Redemption........ The MOPPRS are subject to redemption from the
Remarketing Dealer, in whole but not in part, at
the option of the Operating Partnership on the
Remarketing Date at the Optional Redemption Price.
The MOPPRS are not otherwise subject to redemption
by the Operating Partnership.
Interest Payment Dates..... Interest on the MOPPRS will be payable semiannually
in arrears on each and ,
commencing , 1998.
Ranking.................... The MOPPRS will rank pari passu with each other and
with all other unsecured and unsubordinated
indebtedness of the Operating Partnership, and the
MOPPRS will be effectively subordinated to the
prior claims of any secured indebtedness of the
Operating Partnership to the extent of the value of
the property securing such indebtedness. The MOPPRS
also will be effectively subordinated to all
existing and future third-party indebtedness and
other liabilities of the Operating Partnership's
subsidiaries. As of December 31, 1997, after giving
effect to the Offering, the Preferred Offering, the
Common Share Offering and the Tax-Exempt Bond
Refunding (collectively, the "First Quarter
Transactions"), the secured indebtedness of the
Operating Partnership and all other liabilities of
the Operating Partnership's subsidiaries aggregated
approximately $269.2 million and the unsecured and
unsubordinated indebtedness of the Operating
Partnership aggregated approximately $406.0
million. See "Capitalization."
Form....................... The MOPPRS will be issued and maintained in
book-entry form registered in the name of the
nominee of DTC, except under the limited
circumstances described herein. See "Description of
the MOPPRS -- Tender of MOPPRS; Remarketing" below
and "Description of Notes -- Book-Entry Notes" in
the accompanying Prospectus Supplement.
Use of Proceeds............ The net proceeds to the Operating Partnership from
the Offering (approximately $ million) will be
used to pay down existing indebtedness under the
Revolver.
Limitations on Incurrence
of Debt.................... The MOPPRS contain various covenants, including the
following:
(1) The Operating Partnership will not incur any
Debt if, after giving effect thereto, the
aggregate principal amount of all outstanding
Debt of the Operating Partnership is greater
than 60% of the sum of (i) the Operating
Partnership's Total Assets as of the end of the
most recent fiscal quarter and (ii) the
increase in the Operating
PS-10
<PAGE> 11
Partnership's Total Assets since the end of
such quarter including any increase in the
Operating Partnership's Total Assets resulting
from the incurrence of such additional Debt
(such increase together with the Operating
Partnership's Total Assets is referred to as
"Adjusted Total Assets"). At December 31, 1997,
after giving effect to the First Quarter
Transactions, the Operating Partnership's Debt
to Adjusted Total Assets was 37.9%.
(2) The Operating Partnership will not incur any
Secured Debt if, after giving effect thereto,
the aggregate amount of all outstanding Secured
Debt of the Operating Partnership is greater
than 40% of the Operating Partnership's
Adjusted Total Assets. At December 31, 1997,
after giving effect to the First Quarter
Transactions, the Operating Partnership's
Secured Debt to Adjusted Total Assets was
15.1%.
(3) The Operating Partnership will not incur any
Debt if Consolidated Income Available for Debt
Service for the four consecutive fiscal
quarters most recently ended prior to the date
of the incurrence of such Debt, on a pro forma
basis, would be less than 1.5 times the Annual
Debt Service Charge on all Debt outstanding
immediately after the incurrence of such
additional Debt. The Operating Partnership's
Consolidated Income Available for Debt Service
Charge for the year ended December 31, 1997 was
4.8x. The Operating Partnership does not expect
this ratio to change materially as a result of
this Offering, as the net proceeds of this
Offering will be used primarily to reduce debt.
(4) The Operating Partnership will maintain Total
Unencumbered Assets of not less than 1.5 times
the aggregate outstanding principal amount of
the Unsecured Debt of the Operating
Partnership. At December 31, 1997, after giving
effect to the First Quarter Transactions, the
ratio of the Operating Partnership's Total
Unencumbered Assets to Unsecured Debt was 3.9x.
For certain defined terms and additional
covenants, see "Description of Notes -- Certain
Covenants" in the accompanying Prospectus
Supplement.
PS-11
<PAGE> 12
USE OF PROCEEDS
The net proceeds to the Operating Partnership from the Offering, after
payment of all expenses of the Offering, are estimated to be approximately
$ . The Operating Partnership intends to use the net proceeds from the
Offering to repay borrowings outstanding under the Revolver. The Revolver
terminates on May 1, 2000, and borrowings thereunder bear interest, at the
option of the Operating Partnership, at LIBOR plus 0.675% or prime minus 0.25%.
As of December 31, 1997, interest accrued on borrowings outstanding under the
Revolver at a weighted average rate of 6.53% per annum.
CAPITALIZATION
The following table sets forth the capitalization of the Operating
Partnership as of December 31, 1997 and as adjusted to give effect to (i) the
issuance and sale of the MOPPRS offered hereby by the Operating Partnership and
the application of the estimated net proceeds therefrom, (ii) the issuance to
the Company of 3,500,000 Units on March 4, 1998 and the application of the net
proceeds therefrom and (iii) the issuance to the Company of 2,000,000 Series C
Preferred Units on February 9, 1998 and the application of the net proceeds
therefrom. See "Use of Proceeds." The information set forth in the following
table should be read in conjunction with the financial and other information
included elsewhere and incorporated by reference in this Pricing Supplement, the
accompanying Prospectus Supplement and the Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
DEBT:
Notes payable............................................. $ 821,209 $ 643,009
Total debt........................................ 821,209 643,009
PARTNERS' EQUITY:
Partners' equity.......................................... 869,304 1,046,774
Total partners' equity............................ 869,304 1,046,774
---------- ----------
Total capitalization.............................. $1,690,513 $1,689,783
========== ==========
</TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
The Operating Partnership's ratio of earnings to fixed charges was 2.7 for
the nine months ended September 30, 1997.
For purposes of calculating the ratio of earnings to fixed charges,
earnings have been calculated by adding fixed charges, excluding capitalized
interest to pre-tax income from continuing operations. Fixed charges consist of
interest costs, whether expensed or capitalized, the interest component of
rental expense and amortization of debt issuance costs.
PS-12
<PAGE> 13
BUSINESS AND COMMUNITIES
THE OPERATING PARTNERSHIP
The Operating Partnership is one of the largest developers and operators of
upscale multifamily apartment communities in the Southeastern and Southwestern
United States. The Operating Partnership currently owns 78 stabilized
communities (the "Communities") containing 25,938 apartment units located
primarily in metropolitan Atlanta, Georgia, Dallas, Texas and Tampa, Florida. In
addition, the Operating Partnership currently has under construction or in
initial lease-up 13 new communities and additions to three existing communities
in the Atlanta, Georgia, Dallas and Houston, Texas, Tampa, Florida, Denver,
Colorado and Nashville, Tennessee metropolitan areas that will contain an
aggregate of 4,945 apartment units upon completion. For the year ended December
31, 1997, the average economic occupancy rate of the 45 Communities stabilized
for the entire year was 94.9%. The average monthly rental rate per apartment
unit at these Communities for December 1997 was $811. The Operating Partnership
also manages through affiliates approximately 10,000 additional apartment units
owned by third parties. The Operating Partnership is a fully-integrated
organization with multifamily development, acquisition, operation and asset
management expertise and has approximately 1,600 employees, none of whom is a
party to a collective bargaining agreement.
Since it began doing business in 1971, the Operating Partnership has
pursued three distinctive core business strategies that, for over 25 years, have
remained substantially unchanged:
- Investment Building. Investment building means taking a long-term
view of the assets the Operating Partnership creates. The Operating
Partnership develops communities with the intention of operating them
for periods that are relatively long by the standards of the apartment
industry. Key elements of the Operating Partnership's investment
building strategy include instilling a disciplined team approach to
development decisions; selecting sites in niche and infill locations in
strong primary markets; consistently constructing new apartment
communities with a uniformly high quality and conducting ongoing
property improvements.
- Promotion of the Post(R) Brand Name. The Post(R) brand name strategy
has been integral to the success of the Operating Partnership and, to
the knowledge of the Operating Partnership, has not been successfully
duplicated within the multifamily real estate industry in any major
U.S. market. For such a strategy to work, a company must develop and
implement systems to achieve uniformly high quality and value
throughout its operations. As a result of the Operating Partnership's
efforts in developing and maintaining its communities, the Operating
Partnership believes that the Post(R) brand name is synonymous with
quality upscale apartment communities that are situated in desirable
locations and provide superior resident service. Key elements in
implementing the Operating Partnership's brand name strategy include
extensively utilizing the trademarked brand name; adhering to quality
in all aspects of the Operating Partnership's operations; developing
and implementing leading edge training programs and coordinating the
Operating Partnership's advertising programs to increase brand name
recognition.
- Service Orientation. The Operating Partnership's mission statement
is: "To provide the superior apartment living experience for our
residents." By striving to provide a superior product and superior
service, the Operating Partnership believes that it will be able to
achieve its long-term goals. The Operating Partnership believes that it
provides its residents with a superior product and superior service
through its uniformly high quality construction, award-winning
landscaping and numerous amenities, including on-site business centers,
on-site courtesy officers, urban vegetable gardens and state-of-the-art
fitness centers.
The Operating Partnership believes that with the implementation of these
strategies, multifamily properties in its primary markets have the potential
over the long term to provide investment returns that exceed national averages.
According to recent market surveys, employment growth, population growth and
household formation growth in the Operating Partnership's primary markets have
exceeded, and are forecasted to continue to exceed, national averages.
PS-13
<PAGE> 14
Flexible and Conservative Capital Structure. The Operating Partnership has
and plans to continue to maintain a flexible and conservative capital structure
that enhances its access to the capital markets on favorable terms and promotes
future earnings growth.
Since formation in July 1993, the Operating Partnership has concentrated on
enhancing its financial flexibility by improving its capital structure. The $200
million Revolver, the issuance of $50 million of unsecured senior notes to the
Northwestern Mutual Life Insurance Company (the "NML Notes"), the agreement with
the Federal National Mortgage Association ("FNMA") to provide credit enhancement
for the Operating Partnership's outstanding tax-exempt bonds (including
reissuance at maturity) and its economically defeased bonds until June 2025, the
issuance of $306 million of publicly traded unsecured senior notes and the $20
million unsecured revolving line of credit with Wachovia Bank of Georgia, N.A.
(the "Cash Management Line") all demonstrate the Operating Partnership's
successful efforts to maintain a flexible and conservative capital structure.
The Operating Partnership's financial position reflects its conservative
financial strategy:
- The Operating Partnership has greatly extended and staggered debt
maturities. After giving effect to the First Quarter Transactions, the
Operating Partnership's debt had a weighted average maturity of 12.4 years
at December 31, 1997.
- As of December 31, 1997, the Operating Partnership had 70 Communities
unencumbered by mortgage debt with over $1,550 million of undepreciated
book value supporting the Operating Partnership's unsecured debt. Net
operating income from these unencumbered Communities as a percentage of
total net operating income for all Communities increased from 42.7% at
June 30, 1995 to 72.3% at December 31, 1997.
- Total debt to total market capitalization ratio, after giving effect to
the First Quarter Transactions, of 28% at December 31, 1997.
- Total debt as a percentage of undepreciated real estate assets, after
giving effect to the First Quarter Transactions, of 34.9% at December 31,
1997.
- Interest coverage for the year ending December 31, 1997 was 4.8x.
Management does not expect the interest coverage ratio to change
materially as a result of this Offering, as net proceeds from this
Offering will be used primarily to refinance interim debt with a current
interest rate comparable to the MOPPRS.
MULTIFAMILY PROPERTIES IN THE OPERATING PARTNERSHIP'S PRIMARY MARKETS
The Operating Partnership believes that multifamily properties in its
primary markets have the potential over the long term to provide investment
returns that exceed national averages. According to recent market surveys,
employment, population and household formation growth in the Operating
Partnership's primary markets have shown, and are forecasted to continue to
show, growth that exceed national averages, as shown in the tables below.
<TABLE>
<CAPTION>
HOUSEHOLD
EMPLOYMENT POPULATION FORMATION
GROWTH GROWTH GROWTH
MARKETS (1990-1997) (1990-1997) (1990-1997)
- ------- ----------- ----------- -----------
<S> <C> <C> <C>
Atlanta................................................. 21.3% 20.2% 21.0%
Dallas.................................................. 14.9 13.8 14.0
Tampa................................................... 16.0 9.6 7.8
Charlotte............................................... 15.4 14.4 14.7
Nashville............................................... 22.0 14.5 14.7
Houston................................................. 12.5 15.4 15.5
Denver.................................................. 16.8 16.7 16.9
Top 50 Metropolitan Statistical Areas................... 7.9 7.6 7.8
</TABLE>
PS-14
<PAGE> 15
<TABLE>
<CAPTION>
PROJECTED
PROJECTED PROJECTED HOUSEHOLD
EMPLOYMENT POPULATION FORMATION
GROWTH GROWTH GROWTH
MARKETS (1998-2010) (1998-2010) (1998-2010)
- ------- ----------- ----------- -----------
<S> <C> <C> <C>
Atlanta................................................. 22.1% 23.6% 26.4%
Dallas.................................................. 17.5 19.2 21.4
Tampa................................................... 23.9 23.6 23.7
Charlotte............................................... 17.6 20.1 22.4
Nashville............................................... 17.3 18.8 20.6
Houston................................................. 18.7 21.4 23.6
Denver.................................................. 18.6 21.1 23.0
Top 50 Metropolitan Statistical Areas................... 13.3 11.0 13.0
</TABLE>
- ---------------
Source: Woods & Poole: 1997 MSA Profile
In addition, the Operating Partnership expects that the multifamily housing
market in its primary markets will be positively affected by the following
trends: (i) lifestyle changes that are resulting in an older, more affluent and
more demanding renter and (ii) a decline in home price appreciation in recent
years, which changes the economic advantages of home ownership. The Operating
Partnership believes that these trends will offset to some extent the general
trend of a decline in the growth rate of the adult population in the prime
rental population of 20-35 year olds and the current low interest rates for home
mortgages.
THE COMMUNITIES
The Operating Partnership or its predecessors developed all but 14 of the
Post(R) Communities and currently manages all of the Communities. Forty-four of
the Communities have in excess of 300 apartment units, with the largest
Community having a total of 907 apartment units. Sixty-nine of the 78
Communities, comprising approximately 92% of such Communities' apartment units,
were completed after January 1, 1986. The average age of the Communities is
approximately seven years. The average economic occupancy rate for Fully
Stabilized Communities was 94.8% and 95.4% for the twelve months ended December
31, 1997 and 1996, respectively.
The following table presents information concerning the Communities:
<TABLE>
<CAPTION>
DECEMBER 1997 1997
AVERAGE AVERAGE AVERAGE
YEAR UNIT SIZE NUMBER OF RENTAL RATES ECONOMIC
COMMUNITIES LOCATION(1) COMPLETED (SQUARE FEET) UNITS PER UNIT OCCUPANCY(2)
- ----------- ----------- --------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
GEORGIA
Post Ashford(R)............ Atlanta 1987 872 222 $ 760 96.0%
Post Bridge(R)............. Atlanta 1986 847 354 655 94.5
Post Brookhaven(R)......... Atlanta 1990-92(3) 991 735 929 92.0
Post Canyon(R)............. Atlanta 1986 899 494 684 96.9
Post Chase(R).............. Atlanta 1987 938 410 684 94.7
Post Chastain(R)........... Atlanta 1990 965 558 980 94.5
Post Collier Hills(R)...... Atlanta 1997 967 396 987 N/A(4)
Post Corners(R)............ Atlanta 1986 860 460 691 95.4
Post Court(R).............. Atlanta 1988 838 446 676 95.0
Post Creek(R).............. Atlanta 1983(5) 1,180 810 884 94.3
Post Crest(R).............. Atlanta 1996 1,073 410 950 96.8
Post Crossing(R)........... Atlanta 1995 1,067 354 1,054 95.9
Post Dunwoody(R)........... Atlanta 1989-96(3) 941 530 927 93.4
Post Glen(R)............... Atlanta 1997 1,113 314 1,137 N/A(4)
Post Lane(R)............... Atlanta 1988 840 166 721 97.2
Post Lenox Park(TM)........ Atlanta 1995 1,030 206 1,075 97.4
Post Mill(R)............... Atlanta 1985 952 398 713 93.2
Post Oak(TM)............... Atlanta 1993 1,003 182 995 97.4
Post Oglethorpe(R)......... Atlanta 1994 1,205 250 1,210 93.2
Post Park(R)............... Atlanta 1988-90(3) 904 770 780 95.0
Post Parkwood(R)........... Atlanta 1995 1,071 125 931 95.4
Post Peachtree Hills(R).... Atlanta 1992-94(3) 982 300 1,007 96.3
Post Pointe(R)............. Atlanta.. 1988 835 360 671 95.4
Post Renaissance(R)(6)..... Atlanta 1992-94(3) 890 342 926 94.5
Post River(R).............. Atlanta 1991 983 125 1,118 93.1
Post Summit(R)............. Atlanta 1990 957 148 859 96.6
</TABLE>
PS-15
<PAGE> 16
<TABLE>
<CAPTION>
DECEMBER 1997 1997
AVERAGE AVERAGE AVERAGE
YEAR UNIT SIZE NUMBER OF RENTAL RATES ECONOMIC
COMMUNITIES LOCATION(1) COMPLETED (SQUARE FEET) UNITS PER UNIT OCCUPANCY(2)
- ----------- ----------- --------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Post Terrace(R)............ Atlanta 1996 1,144 296 1,066 94.1
Post Valley(R)............. Atlanta 1988 854 496 659 93.6
Post Village(R)............ Atlanta 915 724 92.7
The Arbors............... 1983 1,063 301
The Fountains............ 1987 850 352
The Gardens.............. 1986 891 494
The Hills................ 1984 953 241
The Meadows.............. 1988 817 350
Post Vinings(R)............ Atlanta 1989-91(3) 964 403 780 95.0
Post Walk(R)............... Atlanta 1984-87(7)(3) 932 476 814 95.2
Post Woods(R).............. Atlanta 1977-83(3) 1,057 494 857 93.9
----- ------ ------ -----
Subtotal/Average--Atlanta. 965 13,768 872 95.0%
----- ------ ------ -----
TEXAS
Addison Circle Apartment
Homes by Post(TM) Phase
I........................ Dallas 1997 896 460 866 N/A(4)
Cole's Corner.............. Dallas 1997 796 186 943 N/A(4)
Columbus Square by
Post(TM)................. Dallas 1996 861 218 1,066 98.3
Parkway Village............ Dallas 1986 1,308 136 1,108 88.2
Post Parkwood(R)(3)(8)..... Dallas 1962-70 1,042 96 1,048 98.5
Post Ascension(TM)......... Dallas 1985-95(3) 929 165 787 93.0
Post Hackberry Creek(TM)... Dallas 1988-96(3) 865 432 763 96.6
Post Lakeside(TM).......... Dallas 1986 791 327 781 98.4
Post Reflections(TM)....... Dallas 1986 797 198 642 99.0
Post Townlake(TM)/Parks.... Dallas 1986-87(3) 869 398 698 98.5
Post White Rock(TM)........ Dallas 1988 659 207 676 93.5
Post Winsted(TM)........... Dallas 1996 728 314 690 98.5
The Shores by Post(TM)..... Dallas 1988-97(3) 874 907 868 97.0
Springstead Condos(9)...... Dallas 1983 1,157 38 1,207 94.4
The Abbey of
State-Thomas............. Dallas 1996 1,276 34 1,800 97.0
The Commons at Turtle
Creek(10)................ Dallas 1985 645 158 703 98.0
The Meridian at
State-Thomas............. Dallas 1991 798 132 1,007 97.0
The Residences on
McKinney................. Dallas 1986 749 196 987 95.7
The Vineyard of Uptown..... Dallas 1996 728 116 845 97.3
The Vintage of Uptown...... Dallas 1993 781 161 850 96.6
The Worthington of State-
Thomas................... Dallas 1993 818 332 1,082 95.6
Uptown Village............. Dallas 1995 767 300 821 98.1%
Villas of Valley
Ranch(9)................. Dallas 1985 1,300 36 1,335 93.6
Post Windhaven(TM)(11)..... Dallas 1991 825 474 528 100.0
----- ------ ------ -----
Subtotal/Average--Texas... 886 6,021 921 96.6%
----- ------ ------ -----
FLORIDA
Post Bay(R)................ Tampa 1988 782 312 674 98.2%
Post Court(R).............. Tampa 1991 1,018 228 788 95.1
Post Fountains at
Lee Vista(R)............. Orlando 1988 835 508 617 96.0
Post Hyde Park(R).......... Tampa 1996 1,009 270 957 99.6
Post Lake(R)............... Orlando 1988 850 740 633 95.7
Post Rocky Point(R)........ Tampa 1996-97(3) 1,018 626 946 N/A(4)
Post Village(R)............ Tampa 941 742 94.8
The Arbors............... 1991 967 304
The Lakes................ 1989 895 360
The Oaks................. 1991 968 336
Post Walk(R) at
Old Hyde Park Village..... Tampa 1997 984 134 1,165 N/A(4)
----- ------ ------ -----
Subtotal/Average--Florida. 933 3,818 815 96.6%
----- ------ ------ -----
MISSISSIPPI
Post Mark.................. Jackson 1984 988 256 596 97.9%
Post Pointe(R)............. Jackson 1997 812 241 597 N/A(4)
Post Trace(R)(8)........... Jackson 1989-95(3) 734 486 566 94.7
----- ------ ------ -----
Subtotal/Average --
Mississippi.............. 845 983 586 96.3%
----- ------ ------ -----
VIRGINIA
Post Corners(R) at Trinity
Centre................... Fairfax 1996 1,030 336 963 98.2%
Post Forest(R)............. Fairfax 1990 889 364 908 96.8
----- ------ ------ -----
Subtotal/Average--Virginia 960 700 936 97.5%
----- ------ ------ -----
</TABLE>
PS-16
<PAGE> 17
<TABLE>
<CAPTION>
DECEMBER 1997 1997
AVERAGE AVERAGE AVERAGE
YEAR UNIT SIZE NUMBER OF RENTAL RATES ECONOMIC
COMMUNITIES LOCATION(1) COMPLETED (SQUARE FEET) UNITS PER UNIT OCCUPANCY(2)
- ----------- ----------- --------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
NORTH CAROLINA
Post Park at Phillips
Place(R)................. Charlotte 1997 912 402 1,056 N/A(4)
----- ------ ------ -----
TENNESSEE
Post Green Hills(R)........ Nashville 1996 1,056 166 1,099 95.6%
The Lee Apartments......... Nashville 1924 808 80 628 98.8
----- ------ ------ -----
Subtotal/Average --
Tennessee.............. 932 246 864 97.2%
----- ------ ------ -----
TOTAL.................. 930 25,938 $ 874 95.4%(12)
===== ====== ====== =====
</TABLE>
- ---------------
(1) Refers to greater metropolitan areas of cities indicated.
(2) Average economic occupancy is defined as gross potential rent less vacancy
losses, model expenses and bad debt divided by gross potential rent for the
period, expressed as a percentage. For the Texas and Mississippi
communities which were acquired on October 24, 1997, average economic
occupancy is for the period from October 24, 1997 through December 31,
1997.
(3) These dates represent the respective completion dates for multiple phases
of a Community.
(4) During 1997, this community or a phase in this community was in lease-up
and, therefore, is not included.
(5) This community was completed by the Company in 1983, sold during 1986,
managed by the Company through 1993 and reacquired by the Operating
Partnership in 1996.
(6) The Operating Partnership has a leasehold interest in the land underlying
Post Renaissance(R) pursuant to a ground lease that expires on January 1,
2040.
(7) Post Brook(R) and Post Walk(R) were combined and operated as one property
effective January 1, 1997.
(8) Existing property acquired in August 1997.
(9) The Operating Partnership does not own all of the units in these
properties. Information is provided only with respect to the units owned by
the Operating Partnership as of December 31, 1997.
(10) Existing property acquired in February 1997.
(11) Post Windhaven(TM) is subject to a master lease with Electronic Data
Systems.
(12) The overall 1997 average economic occupancy excludes the Texas and
Mississippi communities.
PS-17
<PAGE> 18
MANAGEMENT
The directors and executive officers of the Company, which through wholly
owned subsidiaries is the general partner of the Operating Partnership, and
their positions are as follows:
<TABLE>
<CAPTION>
NAME POSITION AND OFFICES HELD
---- -------------------------
<S> <C>
John A. Williams......... Chairman of the Board, Chief Executive Officer and Director
John T. Glover........... President, Chief Operating Officer, Treasurer and Director
Robert L. Shaw........... President, Post West Division and Director
Arthur M. Blank.......... Director -- President and Chief Executive Officer of The
Home Depot, Inc.
Herschel M. Bloom........ Director -- Partner, King & Spalding
Russell R. French........ Director -- General Partner of Moseley & Co. I and II and a
member of Moseley & Co. III, each of which is the general
partner or manager of a venture capital fund
William A. Parker, Jr.... Director -- Chairman of the Board of Directors of Seminole
Investment Company, L.L.C.
Charles E. Rice.......... Director -- Chairman of the Board of Directors and Chief
Executive Officer of Barnett Banks, Inc. until January 1,
1998
J.C. Shaw................ Director -- Chairman Emeritus, Shaw Industries, Inc.
W. Daniel Faulk, Jr...... President -- Post Atlanta Development
Jeffrey A. Harris........ President -- Post Management Services -- Eastern Division
Sherry W. Cohen.......... Executive Vice President -- Post Corporate Services and
Secretary
James F. Duffy........... Executive Vice President -- Post West Development
Martha J. Logan.......... Executive Vice President -- Post Management
Services -- Eastern Division
Arthur E. Lomenick....... Executive Vice President -- Post West Development
John B. Mears............ Executive Vice President -- Post East Development
Timothy A. Peterson...... Executive Vice President -- Post Corporate Services
Thomas L. Wilkes......... Executive Vice President -- Post Management
Services -- Western Division
Terry L. Chapman......... Senior Vice President -- Post Management
Services -- Eastern Division
Judy M. Denman........... Senior Vice President -- Post Corporate Services
R. Gregory Fox........... Senior Vice President -- Post Corporate Services
John D. Hooks............ Senior Vice President -- Post Management
Services -- Eastern Division
Katharine W. Kelley...... Senior Vice President -- Post Atlanta Development
William F. Leseman....... Senior Vice President -- RAM Partners, Inc.
William C. Lincicome..... Senior Vice President -- Post Landscape Services
Janie S. Maddox.......... Vice President -- Post Corporate Services
</TABLE>
PS-18
<PAGE> 19
DESCRIPTION OF THE MOPPRS
GENERAL
The MOPPRS are part of the Medium-Term Note series of the Operating
Partnership described in the accompanying Prospectus Supplement and Prospectus.
The MOPPRS are to be issued under the Indenture, dated as of September 25, 1996,
as amended or supplemented from time to time, between the Operating Partnership
and SunTrust Bank, Atlanta, as trustee (the "Trustee"), which is more fully
described in the Prospectus Supplement and Prospectus. The following description
of the terms of the MOPPRS supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the Medium-Term
Notes set forth in the Prospectus Supplement and Debt Securities set forth in
the Prospectus. The MOPPRS will be senior unsecured obligations of the Operating
Partnership and will be limited to $100,000,000 in aggregate principal amount.
The MOPPRS will mature on March , 2015 (the "Stated Maturity Date"). Except in
the limited circumstances described herein, the MOPPRS are not subject to
redemption by the Operating Partnership prior to their Stated Maturity Date. See
"-- Redemption" below.
The MOPPRS will bear interest at the annual interest rate of % to the
Remarketing Date. If the Remarketing Dealer elects to remarket the MOPPRS,
except in the limited circumstances described herein, (i) the MOPPRS will be
subject to mandatory tender to the Remarketing Dealer at 100% of the principal
amount thereof for remarketing on the Remarketing Date, on the terms and subject
to the conditions described herein, and (ii) on and after the Remarketing Date,
the MOPPRS will bear interest at the rate determined by the Remarketing Dealer
in accordance with the procedures set forth below (the "Interest Rate to
Maturity"). See "-- Tender of MOPPRS; Remarketing" below.
Under the circumstances described below, the MOPPRS are subject to
redemption by the Operating Partnership from the Remarketing Dealer on the
Remarketing Date. See "-- Redemption" below. If the Remarketing Dealer for any
reason does not purchase all tendered MOPPRS on the Remarketing Date or elects
not to remarket the MOPPRS, or in certain other limited circumstances described
herein, the Operating Partnership will be required to repurchase the MOPPRS from
the Beneficial Owners thereof on the Remarketing Date, at 100% of the principal
amount thereof plus accrued interest, if any. See "-- Repurchase" below.
The MOPPRS will bear interest from March , 1998, payable semiannually on
and of each year (each, an "Interest Payment Date"), commencing
, 1998, to the persons in whose name the MOPPRS are registered on
the fifteenth calendar day (whether or not a Business Day) immediately preceding
the related Interest Payment Date (each, a "Record Date"). Interest on the
MOPPRS will be computed on the basis of a 360-day year of twelve 30-day months.
"Business Day" means any day other than a Saturday, Sunday or a day on which
banking institutions in The City of New York are authorized or obligated by law,
executive order or governmental decree to be closed.
Interest payable on any Interest Payment Date and at the Stated Maturity
Date or date of earlier redemption or repurchase shall be the amount of interest
accrued from and including the next preceding Interest Payment Date in respect
of which interest has been paid or duly provided for (or from and including
March , 1998, if no interest has been paid or duly provided for) with respect
to the MOPPRS to but excluding such Interest Payment Date or the Stated Maturity
Date or date of redemption or repurchase, as the case may be. If any Interest
Payment Date or the Stated Maturity Date or date of redemption or repurchase of
MOPPRS falls on a day that is not a Business Day, the payment shall be made on
the next Business Day with the same force and effect as if it were made on the
date such payment was due and no interest shall accrue on the amount so payable
for the period from and after such Interest Payment Date or the Stated Maturity
Date or date of earlier redemption or repurchase, as the case may be.
The MOPPRS will be issued in denominations of $1,000 and integral multiples
thereof.
PS-19
<PAGE> 20
TENDER OF MOPPRS; REMARKETING
The following description sets forth the terms and conditions of the
remarketing of the MOPPRS, in the event that the Remarketing Dealer elects to
purchase the MOPPRS and remarkets the MOPPRS on the Remarketing Date.
MANDATORY TENDER. Provided that the Remarketing Dealer gives notice to the
Operating Partnership and the Trustee on a Business Day not later than five
Business Days prior to the Remarketing Date of its intention to purchase the
MOPPRS for remarketing (the "Notification Date"), each MOPPRS will be
automatically tendered, or deemed tendered, to the Remarketing Dealer for
purchase on the Remarketing Date, except in the circumstances described under
"-- Repurchase" or "-- Redemption" below. The purchase price for the tendered
MOPPRS to be paid by the Remarketing Dealer will equal 100% of the principal
amount thereof. See "-- Notification of Results; Settlement" below. When the
MOPPRS are tendered for remarketing, the Remarketing Dealer may remarket the
MOPPRS for its own account at varying prices to be determined by the Remarketing
Dealer at the time of each sale. From and after the Remarketing Date, the MOPPRS
will bear interest at the Interest Rate to Maturity. If the Remarketing Dealer
elects to remarket the MOPPRS, the obligation of the Remarketing Dealer to
purchase the MOPPRS on the Remarketing Date is subject to, among other things,
the conditions that, since the Notification Date, no material adverse change in
the condition of the Operating Partnership and its subsidiaries, considered as
one enterprise, shall have occurred and that no Event of Default (as defined in
the Indenture), or any event which, with the giving of notice or passage of
time, or both, would constitute an Event of Default, with respect to the MOPPRS
shall have occurred and be continuing. If for any reason the Remarketing Dealer
does not purchase all tendered MOPPRS on the Remarketing Date, the Operating
Partnership will be required to repurchase the MOPPRS from the Beneficial Owners
thereof at a price equal to the principal amount thereof plus all accrued and
unpaid interest, if any, on the MOPPRS to the Remarketing Date. See
"-- Repurchase" below.
The Interest Rate to Maturity shall be determined by the Remarketing Dealer
by 3:30 p.m., New York City time, on the third Business Day immediately
preceding the Remarketing Date (the "Determination Date") to the nearest one
hundred-thousandth (0.00001) of one percent per annum and will be equal to
% (the "Base Rate") plus the Applicable Spread (as defined below) which
will be based on the Dollar Price (as defined below) of the MOPPRS.
The "Applicable Spread" will be the lowest bid indication, expressed as a
spread (in the form of a percentage or in basis points) above the Base Rate,
obtained by the Remarketing Dealer on the Determination Date from the bids
quoted by five Reference Corporate Dealers (as defined below) for the full
aggregate principal amount of the MOPPRS at the Dollar Price, but assuming (i)
an issue date equal to the Remarketing Date, with settlement on such date
without accrued interest, (ii) a maturity date equal to the Stated Maturity Date
of the MOPPRS, and (iii) a stated annual interest rate, payable semiannually on
each Interest Payment Date, equal to the Base Rate plus the spread bid by the
applicable Reference Corporate Dealer. If fewer than five Reference Corporate
Dealers bid as described above, then the Applicable Spread shall be the lowest
of such bid indications obtained as described above. The Interest Rate to
Maturity announced by the Remarketing Dealer, absent manifest error, shall be
binding and conclusive upon the Beneficial Owners and Holders of the MOPPRS, the
Operating Partnership and the Trustee.
"Dollar Price" means, with respect to the MOPPRS, the present value as
determined by the Remarketing Dealer, as of the Remarketing Date, of the
Remaining Scheduled Payments (as defined below) discounted to the Remarketing
Date, on a semiannual basis (assuming a 360-day year consisting of twelve 30-
day months), at the Treasury Rate (as defined below).
"Reference Corporate Dealers" means leading dealers of publicly traded debt
securities of the Operating Partnership in The City of New York (which may
include the Remarketing Dealer or one of its affiliates) selected by the
Remarketing Dealer.
"Treasury Rate" means, with respect to the Remarketing Date, the rate per
annum equal to the semiannual equivalent yield to maturity or interpolated (on a
day count basis) yield to maturity of the Comparable Treasury Issues (as defined
below), assuming a price for the Comparable Treasury Issues
PS-20
<PAGE> 21
(expressed as a percentage of its principal amount), equal to the Comparable
Treasury Price (as defined below) for such Remarketing Date.
"Comparable Treasury Issues" means the United States Treasury security or
securities selected by the Remarketing Dealer as having an actual or
interpolated maturity or maturities comparable to the remaining term of the
MOPPRS being purchased.
"Comparable Treasury Price" means, with respect to the Remarketing Date,
(a) the offer prices for the Comparable Treasury Issues (expressed in each case
as a percentage of its principal amount) on the Determination Date, as set forth
on "Telerate Page 500" (or such other page as may replace Telerate Page 500) or
(b) if such page (or any successor page) is not displayed or does not contain
such offer prices on such Business Day, (i) the average of the Reference
Treasury Dealer Quotations for such Remarketing Date, after excluding the
highest and lowest of such Reference Treasury Dealer Quotations, or (ii) if the
Remarketing Dealer obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Reference Treasury Dealer Quotations.
"Telerate Page 500" means the display designated as "Telerate Page 500" on Dow
Jones Markets Limited (or such other page as may replace Telerate Page 500 on
such service) or such other service displaying the offer prices specified in (a)
above as may replace Dow Jones Markets Limited. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and the
Remarketing Date, the offer prices for the Comparable Treasury Issues (expressed
in each case as a percentage of its principal amount) quoted to the Remarketing
Dealer by such Reference Treasury Dealer by 3:30 p.m., New York City time, on
the Determination Date.
"Reference Treasury Dealer" means each of Credit Suisse First Boston
Corporation, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and Salomon Brothers Inc and
their respective successors; provided, however, that if any of the foregoing or
their affiliates shall cease to be a primary U.S. Government securities dealer
in The City of New York (a "Primary Treasury Dealer"), the Remarketing Dealer
shall substitute therefor another Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to the MOPPRS, the
remaining scheduled payments of the principal thereof and interest thereon,
calculated at the Base Rate only, that would be due after the Remarketing Date
to and including the Stated Maturity Date, as determined by the Remarketing
Dealer; provided, however, that if the Remarketing Date is not an Interest
Payment Date with respect to the MOPPRS, the amount of the next succeeding
scheduled interest payment thereon, calculated at the Base Rate only, will be
reduced by the amount of interest accrued thereon, calculated at the Base Rate
only, to the Remarketing Date.
NOTIFICATION OF RESULTS; SETTLEMENT. Provided the Remarketing Dealer has
previously notified the Operating Partnership and the Trustee on the
Notification Date of its intention to purchase all tendered MOPPRS on the
Remarketing Date, the Remarketing Dealer will notify the Operating Partnership,
the Trustee and DTC by telephone, confirmed in writing (which may include
facsimile or other electronic transmission), by 4:00 p.m., New York City time,
on the Determination Date, of the Interest Rate to Maturity. All of the tendered
MOPPRS will be automatically delivered to the account of the Trustee, by
book-entry through DTC pending payment of the purchase price therefor, on the
Remarketing Date.
In the event that the Remarketing Dealer purchases the tendered MOPPRS on
the Remarketing Date, the Remarketing Dealer will make or cause the Trustee to
make payment to the DTC Participant of each tendering Beneficial Owner of
MOPPRS, by book-entry through DTC by the close of business on the Remarketing
Date against delivery through DTC of such Beneficial Owner's tendered MOPPRS, of
100% of the principal amount of the tendered MOPPRS that have been purchased for
remarketing by the Remarketing Dealer. If the Remarketing Dealer does not
purchase all of the MOPPRS on the Remarketing Date, it will be the obligation of
the Operating Partnership to make or cause to be made such payment for the
MOPPRS, as described below under "-- Repurchase." In any case, the Operating
Partnership will make or cause the Trustee to make payment of interest to each
Beneficial Owner of MOPPRS due on the Remarketing Date by book-entry through DTC
by the close of business on the Remarketing Date.
PS-21
<PAGE> 22
The transactions described above will be executed on the Remarketing Date
through DTC in accordance with the procedures of DTC, and the accounts of the
respective DTC Participants will be debited and credited and the MOPPRS
delivered by book-entry as necessary to effect the purchases and sales thereof.
Transactions involving the sale and purchase of MOPPRS remarketed by the
Remarketing Dealer on and after the Remarketing Date will settle in immediately
available funds through DTC's Same-Day Funds Settlement System.
The tender and settlement procedures described above, including provisions
for payment by purchasers of MOPPRS in the remarketing or for payment to selling
Beneficial Owners of tendered MOPPRS, may be modified to the extent required by
DTC or to the extent required to facilitate the tender and remarketing of MOPPRS
in certificated form, if the book-entry system is no longer available for the
MOPPRS at the time of the remarketing. In addition, the Remarketing Dealer may,
in accordance with the terms of the Indenture, modify the tender and settlement
procedures set forth above in order to facilitate the tender and settlement
process.
As long as DTC's nominee holds the certificates representing any MOPPRS in
the book-entry system of DTC, no certificates for such MOPPRS will be delivered
by any selling Beneficial Owner to reflect any transfer of such MOPPRS effected
in the remarketing. In addition, under the terms of the MOPPRS and the
Remarketing Agreement (described below), the Operating Partnership has agreed
that, notwithstanding any provision to the contrary set forth in the Indenture,
(i) it will use its best efforts to maintain the MOPPRS in book-entry form with
DTC or any successor thereto and to appoint a successor depositary to the extent
necessary to maintain the MOPPRS in book-entry form, and (ii) it will waive any
discretionary right it otherwise has under the Indenture to cause the MOPPRS to
be issued in certificated form.
For further information with respect to transfers and settlement through
DTC, see "-- Same-Day Settlement and Payment" below and "Description of
Notes -- Book-Entry Notes" in the accompanying Prospectus Supplement.
THE REMARKETING DEALER. The Operating Partnership and the Remarketing
Dealer are entering into a Remarketing Agreement, the general terms and
provisions of which are summarized below.
The Remarketing Dealer will not receive any fees or reimbursement of
expenses from the Operating Partnership in connection with the remarketing.
The Operating Partnership will agree to indemnify the Remarketing Dealer
against certain liabilities, including liabilities under the Securities Act of
1933 (the "Securities Act"), arising out of or in connection with its duties
under the Remarketing Agreement.
In the event that the Remarketing Dealer elects to remarket the MOPPRS as
described herein, the obligation of the Remarketing Dealer to purchase MOPPRS
from tendering Beneficial Owners of MOPPRS will be subject to several conditions
precedent set forth in the Remarketing Agreement, including the conditions that,
since the Notification Date, no material adverse change in the condition of the
Operating Partnership and its subsidiaries, considered as one enterprise, shall
have occurred and that no Event of Default (as defined in the Indenture), or any
event which, with the giving of notice or passage of time, or both, would
constitute an Event of Default, with respect to the MOPPRS shall have occurred
and be continuing. In addition, the Remarketing Agreement will provide for the
termination thereof, or redetermination of the Interest Rate to Maturity, by the
Remarketing Dealer on or before the Remarketing Date, upon the occurrence of
certain events as set forth in the Remarketing Agreement.
No Holder or Beneficial Owner of any MOPPRS shall have any rights or claims
under the Remarketing Agreement or against the Remarketing Dealer as a result of
the Remarketing Dealer not purchasing such MOPPRS.
The Remarketing Agreement will also provide that the Remarketing Dealer may
resign at any time as Remarketing Dealer, such resignation to be effective 10
days after the delivery to the Operating Partnership and the Trustee of notice
of such resignation. In such case, it shall be the sole obligation of the
Operating Partnership to appoint a successor Remarketing Dealer.
PS-22
<PAGE> 23
The Remarketing Dealer, in its individual or any other capacity, may buy,
sell, hold and deal in any of the MOPPRS. The Remarketing Dealer may exercise
any vote or join in any action which any Beneficial Owner of MOPPRS may be
entitled to exercise or take with like effect as if it did not act in any
capacity under the Remarketing Agreement. The Remarketing Dealer, in its
individual capacity, either as principal or agent, may also engage in or have an
interest in any financial or other transaction with the Operating Partnership as
freely as if did not act in any capacity under the Remarketing Agreement.
REPURCHASE
In the event that (i) the Remarketing Dealer for any reason does not notify
the Operating Partnership of the Interest Rate to Maturity by 4:00 p.m., New
York City time, on the Determination Date, or (ii) prior to the Remarketing
Date, the Remarketing Dealer has resigned and no successor has been appointed on
or before the Determination Date, or (iii) since the Notification Date, a
material adverse change in the condition of the Operating Partnership and its
subsidiaries, considered as one enterprise, shall have occurred or an Event of
Default, or any event which, with the giving of notice or passage of time, or
both, would constitute an Event of Default, with respect to the MOPPRS shall
have occurred and be continuing, or any other event constituting a termination
event under the Remarketing Agreement shall have occurred, or (iv) the
Remarketing Dealer elects not to remarket the MOPPRS, or (v) the Remarketing
Dealer for any reason does not purchase all tendered MOPPRS on the Remarketing
Date, the Operating Partnership will repurchase the MOPPRS as a whole on the
Remarketing Date at a price equal to 100% of the principal amount of the MOPPRS
plus all accrued and unpaid interest, if any, on the MOPPRS to the Remarketing
Date. In any such case, payment will be made by the Operating Partnership to the
DTC Participant of each tendering Beneficial Owner of MOPPRS, by book-entry
through DTC by the close of business on the Remarketing Date against delivery
through DTC of such Beneficial Owner's tendered MOPPRS.
REDEMPTION
If the Remarketing Dealer elects to remarket the MOPPRS on the Remarketing
Date, the MOPPRS will be subject to mandatory tender to the Remarketing Dealer
for remarketing on such date, in each case subject to the conditions described
above under "-- Tender of MOPPRS; Remarketing" and "-- Repurchase" and to the
Operating Partnership's right to redeem the MOPPRS from the Remarketing Dealer
as described in the next sentence. The Operating Partnership will notify the
Remarketing Dealer and the Trustee, not later than the Business Day immediately
preceding the Determination Date, if the Operating Partnership irrevocably
elects to exercise its right to redeem the MOPPRS, in whole but not in part,
from the Remarketing Dealer on the Remarketing Date at the Optional Redemption
Price.
The "Optional Redemption Price" shall be the greater of (i) 100% of the
principal amount of the MOPPRS and (ii) the sum of the present values of the
Remaining Scheduled Payments thereon, as determined by the Remarketing Dealer,
discounted to the Remarketing Date on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Rate, plus in either
case accrued and unpaid interest from the Remarketing Date on the principal
amount being redeemed to the date of redemption. If the Operating Partnership
elects to redeem the MOPPRS, it shall pay the redemption price therefor in
same-day funds by wire transfer to an account designated by the Remarketing
Dealer on the Remarketing Date.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the MOPPRS will be made by the Underwriters in immediately
available funds. All payments of principal and interest in respect of the MOPPRS
will be made by the Operating Partnership in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, so long as
the MOPPRS are maintained in book-entry form registered in the name of DTC or
its nominee, the MOPPRS will trade in DTC's Same-Day Funds Settlement System,
and secondary market trading activity in the MOPPRS will therefore be required
by DTC
PS-23
<PAGE> 24
to settle in immediately available funds. No assurance can be given as to the
effect, if any, of settlement in immediately available funds on trading activity
in the MOPPRS.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the MOPPRS is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (possibly retroactively) by legislation, administrative action
or judicial decision. It deals only with MOPPRS held as capital assets and does
not purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, tax-exempt organizations, individual
retirement and other tax-deferred accounts, regulated investment companies,
dealers in securities or currencies, persons holding MOPPRS as a hedge against
currency risk or as a position in a "straddle" for tax purposes, or persons
whose functional currency is not the U.S. dollar. In addition, this summary only
addresses the Federal income tax consequences of the MOPPRS until the
Remarketing Date and generally does not deal with holders other than the
original purchasers of the MOPPRS. PERSONS CONSIDERING THE PURCHASE OF THE
MOPPRS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF THE
FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE MOPPRS ARISING
UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION. For further information
regarding the Federal income tax consequences of investing in MOPPRS, see
"Certain United States Federal Income Tax Considerations" in the accompanying
Prospectus Supplement.
As used herein, the term "U.S. Holder" means a Beneficial Owner of a MOPPRS
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), (iii) an estate whose
income is subject to United States Federal income tax regardless of its source,
(iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust, or
(v) any other person whose income or gain in respect of a MOPPRS is effectively
connected with the conduct of a United States trade or business. Notwithstanding
the preceding sentence, to the extent provided in Treasury regulations, certain
trusts in existence on August 20, 1996, and treated as United States persons
prior to such date, that elect to continue to be treated as United States
persons also will be a U.S. Holder. As used herein, the term "non-U.S. Holder"
means a Beneficial Owner of a MOPPRS that is not a U.S. Holder.
The Federal income tax treatment of the MOPPRS depends, in part, on whether
the MOPPRS are treated as maturing on their Stated Maturity Date (i.e., 2015) or
on the Remarketing Date. The Operating Partnership intends to treat the MOPPRS
as maturing on the Remarketing Date because (i) the holders are required to
tender their MOPPRS on such date, and the tendered MOPPRS are required to be
purchased on such date either by the Remarketing Dealer or, if the Remarketing
Dealer elects not to purchase, by the Operating Partnership, and (ii) the
holders will in either case be paid only the stated principal amount of the
MOPPRS plus any accrued and unpaid interest. Further, if the Remarketing Dealer
elects to purchase the tendered MOPPRS for resale, the Operating Partnership
intends to treat the MOPPRS as newly issued debt instruments on such date having
a 10-year term and bearing the Interest Rate to Maturity.
Assuming the Operating Partnership's treatment of the MOPPRS as maturing on
the Remarketing Date is respected, interest payments in respect of the MOPPRS
will constitute "qualified stated interest" under the Treasury Regulations
dealing with the determination and reporting of original issue discount. As a
result, the MOPPRS will not be treated as issued with original issue discount if
(i) they are sold at par value or (ii) the excess (if any) of the par value over
the MOPPRS' issue price is less than a statutory de minimis amount (generally
1/4 of 1% of the MOPPRS' stated redemption price at the Remarketing Date
multiplied by the number of complete years to the Remarketing Date from the
issue date). Further, interest payments on the
PS-24
<PAGE> 25
MOPPRS will be taxable to a U.S. Holder as ordinary interest income at the time
such payments are accrued or received, in accordance with the U.S. Holder's
regular method of tax accounting.
If the MOPPRS are issued at a discount equal to or greater than the
statutory de minimis amount, a U.S. Holder must include original issue discount
in income as ordinary interest for Federal income tax purposes as it accrues
under a constant yield method regardless of when the cash payments attributable
to such income are received and regardless of the U.S. Holder's regular method
of accounting. See "Certain United States Federal Income Tax
Considerations -- U.S. Holders -- Original Issue Discount" in the accompanying
Prospectus Supplement.
Under the foregoing treatment, upon the sale, exchange or retirement of a
MOPPRS, a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the MOPPRS. A U.S. Holder's adjusted tax basis in
a MOPPRS generally will equal such U.S. Holder's initial investment in the
MOPPRS increased by any original issue discount included in income (and accrued
market discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by the amount of any payments, other than qualified stated
interest payments, received and amortizable bond premium taken with respect to
such MOPPRS.
There can be no assurance that the Internal Revenue Service ("IRS") will
agree with the Operating Partnership's treatment of the MOPPRS and it is
possible that the IRS could assert another treatment. For instance, it is
possible that the IRS could seek to treat the MOPPRS as maturing on the Stated
Maturity Date. In that event, because the Interest Rate to Maturity will not be
determined until the Determination Date, the MOPPRS would be treated as having
contingent interest under the Treasury regulations governing debt instruments
that provide for contingent payments (the "Contingent Payment Regulations"). In
that event, the Operating Partnership would be required to construct a projected
payment schedule for the MOPPRS, based upon the Operating Partnership's current
borrowing costs for comparable noncontingent debt instruments of the Operating
Partnership, from which an estimated yield on the MOPPRS would be calculated. A
U.S. Holder would be required to include in income original issue discount in an
amount equal to the product of the adjusted issue price of the MOPPRS at the
beginning of each interest accrual period and the estimated yield of the MOPPRS.
In general, for these purposes, a MOPPRS' adjusted issue price would equal the
MOPPRS's issue price increased by the interest previously accrued on the MOPPRS,
and reduced by all payments made on the MOPPRS. As a result of the application
of the Contingent Payment Regulations, it is possible that a U.S. Holder would
be required to include interest in income in excess of actual cash payments
received for certain taxable years.
In addition, the character of any gain or loss, upon the sale or exchange
of a MOPPRS (including a sale pursuant to the mandatory tender on the
Remarketing Date) by a U.S. Holder, will likely differ if the MOPPRS were
treated as contingent payment obligations. Any such taxable gain generally would
be treated as ordinary income. Any such taxable loss generally would be ordinary
to the extent of previously accrued original issue discount, and any excess
would generally be treated as capital loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to Federal income taxes on payments
of principal, premium (if any) or interest (including original issue discount,
if any) on a MOPPRS, unless such non-U.S. Holder is a direct or indirect 10% or
greater partner of the Operating Partnership, a controlled foreign corporation
related to the Operating Partnership or a bank receiving interest described in
section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the last United States payor in the chain of payment prior to payment to a
non-U.S. Holder (the "Withholding Agent") must have received in the year in
which a payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the Beneficial Owner
of the MOPPRS under penalties of perjury, (ii) certifies that such owner is not
a U.S. Holder and (iii) provides the name and address of the Beneficial Owner.
The statement may be made on an IRS Form W-8 or a substantially similar form,
and the Beneficial Owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a MOPPRS is held
PS-25
<PAGE> 26
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by the
Beneficial Owner to the organization or institution. The Treasury Department is
considering implementation of further certification requirements aimed at
determining whether the issuer of a debt obligation is related to holders
thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes gain upon retirement or disposition of a MOPPRS,
provided the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. Holder. Certain other exceptions
may be applicable, and a non-U.S. Holder should consult its tax advisor in this
regard.
The MOPPRS will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater partner of the Operating
Partnership or, at the time of such individual's death, payments in respect of
the MOPPRS would have been effectively connected with the conduct by such
individual of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the MOPPRS to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the MOPPRS to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a MOPPRS to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
Beneficial Owner would be allowed as a refund or a credit against such
Beneficial Owner's Federal income tax provided the required information is
furnished to the IRS.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
FINAL BOND PREMIUM REGULATIONS
Final Treasury regulations dealing with the amortization of bond premiums
have been issued effective for debt instruments acquired on or after March 2,
1998. In general, the final regulations adopt the principles of the proposed
Treasury regulations, which are discussed in the accompanying Prospectus
Supplement. See "Certain United States Federal Income Tax Considerations -- U.S.
Holders -- Premium" in the accompanying Prospectus Supplement.
PS-26
<PAGE> 27
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain restrictions on (a) employee benefit plans (as
defined in Section 3(3) of ERISA), (b) plans described in section 4975(e)(1) of
the Code, including individual retirement accounts or Keogh plans, (c) any
entities whose underlying assets include plan assets by reason of a plan's
investment in such entities (each, including (a) and (b), a "Plan") and (d)
persons who have certain specified relationships to such Plans
("Parties-in-Interest" under ERISA and "Disqualified Persons" under the Code).
ERISA also imposes certain duties on persons who are fiduciaries of Plans
subject to ERISA and prohibits certain transactions between a Plan and
Parties-in-Interest or Disqualified Persons with respect to such Plans.
The Operating Partnership and the Remarketing Dealer, because of their
activities or the activities of their respective affiliates, may be considered
to be Parties-in-Interest or Disqualified Persons with respect to certain Plans.
If the MOPPRS are acquired by a Plan with respect to which the Operating
Partnership or the Remarketing Dealer is, or subsequently becomes, a
Party-in-Interest or Disqualified Person, the purchase, holding, or sale of
MOPPRS to the Remarketing Dealer could be deemed to be a direct or indirect
violation of the Prohibited Transaction rules of ERISA and the Code unless such
transaction were subject to one or more statutory or administrative exemptions,
such as Prohibited Transaction Class Exemption ("PTCE") 75-1, which exempts
certain transactions involving employee benefit plans and certain
broker-dealers, reporting dealers and banks; PTCE 90-1, which exempts certain
transactions between insurance company pooled separate accounts and
Parties-in-Interest or Disqualified Persons; PTCE 91-38, which exempts certain
transactions between bank collective investment funds and Parties-in-Interest or
Disqualified Persons; PTCE 84-14, which exempts certain transactions effected on
behalf of a Plan by a "qualified professional asset manager;" PTCE 95-60, which
exempts certain transactions between insurance company general accounts and
Parties-in-Interest or Disqualified Persons; or PTCE 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house asset
manager." Even if the conditions specified in one or more of these exemptions
are met, the scope of relief provided by these exemptions may not necessarily
cover all acts that might be construed as prohibited transactions.
Accordingly, prior to making an investment in the MOPPRS, a Plan should
determine whether the Operating Partnership or the Remarketing Dealer is a
Party-in-Interest or Disqualified Person with respect to such Plan and, if so,
whether such transaction is subject to one or more statutory or administrative
exemptions, including those described above.
Prior to making an investment in the MOPPRS, Plans should consult with
their legal advisers concerning the impact of ERISA and the Code and the
potential consequences of such investment with respect to their specific
circumstances. Moreover, each Plan fiduciary should take into account, among
other considerations, whether the fiduciary has the authority to make the
investment on behalf of the Plan; whether the investment constitutes a direct or
indirect transaction with a Party-in-Interest or a Disqualified Person; and
whether under the general fiduciary standards of investment procedure and
diversification an investment in the MOPPRS is appropriate for the Plan, taking
into account, among other things, the overall investment policy of the Plan and
the composition of the Plan's investment portfolio.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution Agreement
by and among the Operating Partnership and Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc. and J.P. Morgan
Securities Inc. as supplemented by a terms agreement (together with the
Distribution Agreement, the "Distribution Agreement") dated as of the date
hereof and relating to the MOPPRS by and among the Operating Partnership and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
NationsBanc Montgomery Securities LLC (the "Underwriters"), the Operating
Partnership has agreed to sell to each of the Underwriters, and each of the
Underwriters has severally agreed to purchase,
PS-27
<PAGE> 28
the respective principal amount of MOPPRS set forth opposite its name below, at
a price equal to % of the principal amount thereof.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF MOPPRS
----------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $
NationsBanc Montgomery Securities LLC.......................
------------
Total.......................................... $100,000,000
============
</TABLE>
In the Distribution Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
MOPPRS offered hereby if any MOPPRS are purchased. The Underwriters have advised
the Operating Partnership that the Underwriters propose to offer the MOPPRS from
time to time for sale in negotiated transactions or otherwise, at prices
relating to prevailing market prices determined at the time of sale. The
Underwriters may effect such transactions by selling MOPPRS to or through
dealers and such dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Underwriters and any purchasers
of MOPPRS for whom they may act as agent. The Underwriters and any dealers that
participate with the Underwriters in the distribution of the MOPPRS may be
deemed to be underwriters, and any discounts or commissions received by them and
any profit on the resale of MOPPRS by them may be deemed to be underwriting
compensation.
The MOPPRS are a new issue of securities with no established trading
market. The Operating Partnership has been advised by the Underwriters that the
Underwriters intend to make a market in the MOPPRS, but they are not obligated
to do so and may discontinue market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the MOPPRS.
The Underwriters are permitted to engage in certain transactions that
maintain or otherwise affect the price of the MOPPRS. Such transactions may
include over-allotment transactions and purchases to cover short positions
created by the Underwriters in connection with the offering. If the Underwriters
create a short position in the MOPPRS in connection with the offering, i.e., if
they sell MOPPRS in an aggregate principal amount exceeding that set forth on
the cover page of this Pricing Supplement, the Underwriters may reduce that
short position by purchasing MOPPRS in the open market.
In general, purchases of a security to reduce a short position could cause
the price of the security to be higher than it might be in the absence of such
purchases.
Neither the Operating Partnership nor the Underwriters make any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the MOPPRS. In
addition, neither the Operating Partnership nor the Underwriters make any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may in the future engage in investment banking transactions
with the Operating Partnership and certain of its affiliates.
The Operating Partnership has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act, or to make
contribution to certain payments in respect thereof.
PS-28
<PAGE> 29
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 20, 1997)
LOGO
$344,000,000
POST APARTMENT HOMES, L.P.
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
------------------------
Post Apartment Homes, L.P. (the "Operating Partnership") may offer from time
to time up to $344,000,000 aggregate initial offering price, or the equivalent
thereof in one or more foreign or composite currencies, of its Medium-Term Notes
Due Nine Months or More from Date of Issue (the "Notes"). Such aggregate initial
offering price is subject to reduction as a result of the sale by the Operating
Partnership of other Debt Securities described in the accompanying Prospectus.
Each Note will mature on any day nine months or more from the date of issue, as
specified in the applicable pricing supplement hereto (each, a "Pricing
Supplement"), and may be subject to redemption at the option of the Operating
Partnership or repayment at the option of the Holder thereof, in each case, in
whole or in part, prior to its Stated Maturity Date, as specified in the
applicable Pricing Supplement. In addition, each Note may be denominated and/or
payable in United States dollars or a foreign or composite currency, as
specified in the applicable Pricing Supplement. The Notes, other than Foreign
Currency Notes, will be issued in minimum denominations of $1,000 and integral
multiples thereof, unless otherwise specified in the applicable Pricing
Supplement, while Foreign Currency Notes will be issued in the minimum
denominations specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Notes will
bear interest at fixed rates ("Fixed Rate Notes") or at floating rates
("Floating Rate Notes"). The applicable Pricing Supplement will specify whether
a Floating Rate Note is a Regular Floating Rate Note, a Floating Rate/Fixed Rate
Note or an Inverse Floating Rate Note and whether the rate of interest thereon
is determined by reference to one or more of the CD Rate, the CMT Rate, the
Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal
Funds Rate, LIBOR, the Prime Rate or the Treasury Rate (each, an "Interest Rate
Basis"), or any other interest rate basis or formula, as adjusted by any Spread
and/or Spread Multiplier. Interest on each Floating Rate Note will accrue from
its date of issue and, unless otherwise specified in the applicable Pricing
Supplement, will be payable monthly, quarterly, semiannually or annually in
arrears, as specified in the applicable Pricing Supplement, and on the Maturity
Date. Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually, as specified in the applicable Pricing
Supplement. Interest on each Fixed Rate Note will accrue from its date of issue
and, unless otherwise specified in the applicable Pricing Supplement, will be
payable semiannually in arrears on May 1 and November 1 of each year and on the
Maturity Date. Notes may also be issued that do not bear any interest currently
or that bear interest at a below market rate. See "Description of Notes."
The interest rate, or formula for the determination of the interest rate,
applicable to each Note and the other variable terms thereof will be established
by the Operating Partnership on the date of issue of such Note and will be
specified in the applicable Pricing Supplement. Interest rates or formulae and
other terms of Notes are subject to change by the Operating Partnership, but no
change will affect any Note already issued or as to which an offer to purchase
has been accepted by the Operating Partnership.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or in certificated form (a "Certificated Note"), as specified in the
applicable Pricing Supplement. Each Book-Entry Note will be represented by one
or more fully registered global securities (the "Global Securities") deposited
with or on behalf of The Depository Trust Company or such other depositary
identified in the applicable Pricing Supplement (the "Depositary") and
registered in the name of the Depositary or the Depositary's nominee. Interests
in the Global Securities will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary (with respect to its
participants) and the Depositary's participants (with respect to beneficial
owners). Except in limited circumstances, Book-Entry Notes will not be
exchangeable for Certificated Notes.
------------------------
SEE "RISK FACTORS," BEGINNING ON PAGE S-2, FOR A DISCUSSION OF RISK FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS TO WHICH IT
RELATES, OR ANY SUPPLEMENT THERETO. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===========================================================================================================================
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO THE
PUBLIC(1) AND COMMISSIONS(1)(2) OPERATING PARTNERSHIP(1)(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note.......................... 100.000% .125% - .750% 99.875% - 99.250%
- ---------------------------------------------------------------------------------------------------------------------------
Total(4).......................... $344,000,000 $430,000 - $2,580,000 $343,570,000 - $341,420,000
===========================================================================================================================
</TABLE>
(1) Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Lehman Brothers Inc. and J. P. Morgan Securities Inc. (the "Agents") may
purchase the Notes, as principal, from the Operating Partnership, for resale
to investors and other purchasers at varying prices relating to prevailing
market prices at the time of resale as determined by the applicable Agent,
or, if so specified in the applicable Pricing Supplement, for resale at a
fixed offering price. Unless otherwise specified in the applicable Pricing
Supplement, any Note sold to any Agent as principal will be purchased by
such Agent at a price equal to 100% of the principal amount thereof less a
percentage of the principal amount equal to the commission applicable to an
agency sale (as described below) of a Note of identical maturity. If agreed
to by the Operating Partnership and an Agent, such Agent may utilize its
reasonable efforts on an agency basis to solicit offers to purchase the
Notes at 100% of the principal amount thereof, unless otherwise specified in
the applicable Pricing Supplement. The Operating Partnership will pay a
commission to the applicable Agent, ranging from .125% to .750% of the
principal amount of a Note, depending upon its stated maturity, sold through
such Agent as an agent of the Operating Partnership. Commissions with
respect to Notes with stated maturities in excess of 30 years that are sold
through an Agent will be negotiated between the Operating Partnership and
such Agent at the time of such sale, See "Plan of Distribution."
(2) The Operating Partnership has agreed to indemnify the Agents against, and to
provide contribution with respect to, certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See "Plan of
Distribution."
(3) Before deducting expenses payable by the Operating Partnership estimated at
$100,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
------------------------
The Notes are being offered on a continuous basis by the Operating
Partnership to or through the Agents. Unless otherwise specified in the
applicable Pricing Supplement, the Notes will not be listed on any securities
exchange and there can be no assurance that the Notes offered hereby will be
sold or if sold that there will be a secondary market for the Notes or liquidity
in the secondary market if one develops. The Operating Partnership reserves the
right to cancel or modify the offer made hereby without notice. The Operating
Partnership or an Agent, if it solicits the offer on an agency basis, may reject
any offer to purchase Notes in whole or in part. See "Plan of Distribution."
------------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
J. P. MORGAN & CO.
------------------------
The date of this Prospectus Supplement is October 31, 1997.
<PAGE> 30
IN CONNECTION WITH THE OFFERING OF NOTES PURCHASED BY AN AGENT AS PRINCIPAL
ON A FIXED PRICE BASIS, SUCH AGENT MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH
STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
RISK FACTORS
This Prospectus Supplement does not describe all of the risks of an
investment in Notes, whether resulting from such Notes being denominated or
payable in or determined by reference to a currency or composite currency other
than United States dollars or to one or more interest rate, currency or other
indices or formulas, or otherwise. The Operating Partnership and the Agents
disclaim any responsibility to advise prospective investors of such risks as
they exist at the date of this Prospectus Supplement or as they change from time
to time. Prospective investors should consult their own financial and legal
advisors as to the risks entailed by an investment in such Notes and the
suitability of investing in such Notes in light of their particular
circumstances. The Notes are not an appropriate investment for investors who are
unsophisticated with respect to foreign currency transactions or transactions
involving the applicable interest rate or currency index or other indices or
formulas. Prospective investors should carefully consider, among other factors,
the matters described below.
STRUCTURE RISKS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, if any, to one or more currencies or composite currencies (including
exchange rates and swap indices between currencies or composite currencies),
commodities, interest rates or other indices, either directly or inversely,
entails significant risks that are not associated with similar investments in a
conventional fixed rate or floating rate debt security. Such risks include,
without limitation, the possibility that such index or indices may be subject to
significant changes, that the resulting interest rate will be less than that
payable on a conventional fixed rate or floating rate debt security issued by
the Operating Partnership at the same time, that the repayment of principal
and/or premium, if any, can occur at times other than that expected by the
investor, and that the investor could lose all or a substantial portion of
principal and/or premium, if any, payable on the Maturity Date. Such risks
depend on a number of interrelated factors, including economic, financial and
political events, over which the Operating Partnership has no control.
Additionally, if the formula used to determine the amount of principal, premium,
if any, and/or interest, if any, payable with respect to such Notes contains a
multiplier or leverage factor, the effect of any change in the applicable index
or indices will be magnified. In recent years, values of certain indices have
been highly volatile and such volatility may be expected to continue in the
future. Fluctuations in the value of any particular index that have occurred in
the past are not necessarily indicative, however, of fluctuations that may occur
in the future.
Any optional redemption feature of the Notes might affect the market value
of such Notes. Since the Operating Partnership may be expected to redeem such
Notes when prevailing interest rates are relatively low, an investor might not
be able to reinvest the redemption proceeds at an effective interest rate as
high as the interest rate on such Notes.
The secondary market for the Notes will be affected by a number of factors
independent of the creditworthiness of the Operating Partnership and the value
of the applicable index or indices, including the complexity and volatility of
such index or indices, the method of calculating the principal, premium, if any,
and/or interest, if any, in respect of such Notes, the time remaining to the
maturity of such Notes, the outstanding amount of such Notes, any redemption
features of such Notes, the amount of other debt securities linked to such index
or indices and the level, direction and volatility of market interest rates
generally. Such factors also will affect the market value of such Notes. In
addition, certain Notes may be designed for specific investment objectives or
strategies and, therefore, may have a more limited secondary market and
experience more price volatility than conventional debt securities. Investors
may not be able to sell such Notes readily or at prices that will enable
investors to realize their anticipated yield. No investor should purchase Notes
unless
S-2
<PAGE> 31
such investor understands and is able to bear the risk that such Notes may not
be readily saleable, that the value of Notes will fluctuate over time and that
such fluctuations may be significant.
CREDIT RATINGS
The credit ratings assigned to the Operating Partnership's medium-term note
program may not reflect the potential impact of all risks related to structure
and other factors on the market value of the Notes. Accordingly, prospective
investors should consult their own financial and legal advisors as to the risks
entailed by an investment in the Notes and the suitability of such Notes in
light of their particular circumstances.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes (as hereinafter defined) entails
significant risks that are not associated with a similar investment in a debt
security denominated and payable in United States dollars. Such risks include,
without limitation, the possibility of significant changes in the rate of
exchange between the United States dollar and the applicable foreign currency or
composite currency and the possibility of the imposition or modification of
exchange controls by the applicable governments or monetary authorities. Such
risks generally depend on factors over which the Operating Partnership has no
control, such as economic, financial and political events and the supply and
demand for the applicable foreign currencies or composite currencies. In
addition, if the formula used to determine the amount of principal, premium, if
any, and/or interest, if any, payable with respect to Foreign Currency Notes
contains a multiplier or leverage factor, the effect of any change in the
applicable currencies or composite currencies will be magnified. In recent
years, rates of exchange between the United States dollar and foreign currencies
or composite currencies have been highly volatile and such volatility may be
expected in the future. Fluctuations in any particular exchange rate that have
occurred in the past are not necessarily indicative, however, of fluctuations
that may occur in the future. Depreciation of the foreign currency or composite
currency in which a Foreign Currency Note is payable against the United States
dollar would result in a decrease in the United States dollar-equivalent yield
of such Foreign Currency Note, in the United States dollar-equivalent value of
the principal and premium, if any, payable on the Maturity Date of such Foreign
Currency Note, and, generally, in the United States dollar-equivalent market
value of such Foreign Currency Note.
Governments or monetary authorities have imposed from time to time, and may
in the future impose or revise, exchange controls at or prior to the date on
which any payment of principal of, or premium, if any, or interest, if any, on,
a Foreign Currency Note is due, which could affect exchange rates as well as the
availability of the foreign currency or composite currency in which such payment
is to be made on such date. Even if there are no exchange controls, it is
possible that the foreign currency or composite currency in which a payment in
respect of any particular Foreign Currency Note is to be made would not be
available on the applicable payment date due to other circumstances beyond the
control of the Operating Partnership. In such cases, the Operating Partnership
will be entitled to satisfy its obligations in respect of such Foreign Currency
Note in United States dollars. See "Special Provisions Relating to Foreign
Currency Notes -- Payment Currency."
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The Operating Partnership's ratio of earnings to fixed charges for 1996 and
the six months ended June 30, 1997 was 2.7 and, 2.8, respectively, and the
Operating Partnership's ratio of earnings to fixed charges and preferred stock
dividends for 1996 and the six months ended June 30, 1997 was 2.6 and 2.6,
respectively. For purposes of computing these ratios, earnings have been
calculated by adding fixed charges excluding capitalized interest, to pre-tax
income from continuing operations. Fixed charges consist of interest costs,
whether expensed or capitalized, the interest component of rental expense and
amortization of debt issuance costs. Preferred stock dividends consist of
dividends paid on the 8 1/2% Series A Cumulative Redeemable Preferred Shares.
S-3
<PAGE> 32
DESCRIPTION OF NOTES
The Notes will be issued as a series of Debt Securities under an Indenture,
dated as of September 25, 1996 as amended or supplemented from time to time (the
"Indenture"), between the Operating Partnership and SunTrust Bank, Atlanta, as
trustee (the "Trustee"). The Indenture is subject to, and governed by, the Trust
Indenture Act of 1939, as amended. The following summary of certain provisions
of the Notes and the Indenture does not purport to be complete and is qualified
in its entirety by reference to the actual provisions of the Notes and the
Indenture. Capitalized terms used but not defined herein shall have the meanings
given to them in the accompanying Prospectus, the Notes or the Indenture, as the
case may be. The term "Debt Securities," as used in this Prospectus Supplement,
refers to all debt securities, including the Notes, issued and issuable from
time to time under the Indenture. The following description of Notes will apply
to each Note offered hereby unless otherwise specified in the applicable Pricing
Supplement. The following description of the Notes supplements, and to the
extent inconsistent therewith, replaces, the description of the general terms
and provisions of the Debt Securities set forth in the Prospectus, to which
reference is hereby made.
GENERAL
All Debt Securities, including the Notes, issued and to be issued under the
Indenture will be unsecured general obligations of the Operating Partnership and
will rank pari passu with all other unsecured and unsubordinated indebtedness of
the Operating Partnership from time to time outstanding. Currently, issued and
outstanding under the Indenture are $100,000,000 aggregate principal amount of
7 1/4% Notes due 2003 and $25,000,000 aggregate principal amount of 7 1/2% Notes
due 2006, which were issued in September 1996 (collectively, the "September
Notes"). The September Notes impose certain restrictions regarding limitations
on incurrence of debt and maintenance of total unencumbered assets as described
in "-- Certain Covenants" below. The September Notes may be redeemed at any time
at the option of the Operating Partnership at a redemption price equal to the
sum of the principal amount of notes being redeemed plus accrued interest and
the "make-whole amount" (as defined in the September Notes).
Also issued and outstanding under the Indenture are notes issued pursuant
to the Operating Partnership's medium-term note program (collectively, the
"Outstanding MTNs") with the following terms:
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT INTEREST RATE MATURITY DATE
- -------------------------- ------------- -------------
<S> <C> <C> <C>
$16 million................. 6.22% December 31, 1999
$30 million................. 3 month LIBOR March 3, 2000
plus 25 basis points
$37 million................. 7.02% April 2, 2001
$13 million................. 7.30% April 1, 2004
$10 million................. 6.69% September 22, 2004
$25 million................. 6.78% September 22, 2005
</TABLE>
The Outstanding MTNs impose certain restrictions regarding limitations on
incurrence of debt and maintenance of total unencumbered assets as described in
"-- Certain Covenants" below.
The Indenture does not limit the aggregate initial offering price of Debt
Securities that may be issued thereunder and Debt Securities may be issued
thereunder from time to time in one or more series up to the aggregate initial
offering price from time to time authorized by the Operating Partnership for
each series. The Notes are effectively subordinated to mortgages and other
secured indebtedness of the Operating Partnership (approximately $165.7 million
at June 30, 1997), which encumber certain assets of the Operating Partnership.
As of June 30, 1997, the Operating Partnership had approximately $228.0 million
in outstanding debt which ranks pari passu to the Notes. The Operating
Partnership may, from time to time, without the consent of the Holders of the
Notes, provide for the issuance of Notes or other Debt Securities under the
Indenture in addition to the $344,000,000 aggregate initial offering price of
Notes offered hereby.
The Notes will be offered on a continuing basis by the Operating
Partnership to or through the Agents and are currently limited to up to
$344,000,000 aggregate initial offering price, or the equivalent thereof in one
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or more foreign or composite currencies. The Notes will be offered on a
continuous basis and will mature on any day nine months or more from their dates
of issue (each, a "Stated Maturity Date"), as specified in the applicable
Pricing Supplement or any prior date on which the principal, or an installment
of principal, of each Certificated Note becomes due and payable, whether by the
declaration of acceleration, notice of redemption at the option of the Operating
Partnership, notice of the Holder's option to elect repayment or otherwise (the
Stated Maturity Date or such prior date, as the case may be, is herein referred
to as the "Maturity Date" with respect to the principal of the applicable Note
repayable on such date). Unless otherwise specified in the applicable Pricing
Supplement, interest-bearing Notes will either be Fixed Rate Notes or Floating
Rate Notes, as specified in the applicable Pricing Supplement. Notes may also be
issued that do not bear any interest currently or that bear interest at a below
market rate.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in, and payments of principal, premium, if any, and/or
interest, if any, in respect thereof will be made in, United States dollars. The
Notes also may be denominated in, and payments of principal, premium, if any,
and/or interest, if any, in respect thereof may be made in, one or more foreign
currencies or composite currencies ("Foreign Currency Notes"). See "Special
Provisions Relating to Foreign Currency Notes -- Payments of Principal, Premium,
if any, and Interest." The currency or composite currency in which a Note is
denominated (or, if such currency or composite currency is no longer legal
tender for the payment of public and private debts, such other currency or
composite currency of the relevant country which is then legal tender for the
payment of such debts), whether United States dollars or otherwise, is herein
referred to as the "Specified Currency." References herein to "United States
dollars," "U.S. dollars" and "U.S.$" are to the lawful currency of the United
States of America ("United States").
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for the Notes in the applicable Specified Currencies. At the
present time, there are limited facilities in the United States for the
conversion of United States dollars into foreign currencies or composite
currencies and vice versa, and commercial banks do not generally offer
non-United States dollar checking or savings account facilities in the United
States. Each applicable Agent is prepared to arrange for the conversion of
United States dollars into the applicable Specified Currency to enable the
purchaser to pay for the related Foreign Currency Note, provided that a request
is made to such Agent on or prior to the third Business Day (as hereinafter
defined) preceding the date of delivery of such Foreign Currency Note, or by
such other day determined by such Agent. Each such conversion will be made by an
Agent on such terms and subject to such conditions, limitations and charges as
such Agent may from time to time establish in accordance with its regular
foreign exchange practices. All costs of exchange will be borne by the purchaser
of each such Foreign Currency Note. See "Special Provisions Relating to Foreign
Currency Notes."
Interest rates offered by the Operating Partnership with respect to the
Notes may differ depending upon, among other things, the aggregate principal
amount of Notes purchased in any single transaction. Notes with different
variable terms other than interest rates may also be offered concurrently to
different investors. Interest rates or formulae and other terms of Notes are
subject to change by the Operating Partnership from time to time, but no such
change will affect any Note already issued or as to which an offer to purchase
has been accepted by the Operating Partnership.
Each Note will be issued in fully registered form as a Book-Entry Note or a
Certificated Note. The minimum denominations of each Note other than a Foreign
Currency Note will be $1,000 and integral multiples thereof, unless otherwise
specified in the applicable Pricing Supplement, while the authorized
denominations of each Foreign Currency Note will be specified in the applicable
Pricing Supplement.
Payments of principal of, and premium, if any, and interest, if any, on,
Book-Entry Notes will be made by the Operating Partnership through the Trustee
to the Depositary. See "-- Book-Entry Notes." In the case of Certificated Notes,
payment of principal and premium, if any, due on the Stated Maturity Date or any
prior Maturity Date will be made in immediately available funds upon
presentation and surrender thereof at the office or agency maintained by the
Operating Partnership for such purpose in the Borough of Manhattan, The City of
New York (or, in the case of any repayment on an Optional Repayment Date, upon
presentation of such Certificated Note and a duly completed election form in
accordance with the provisions described
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<PAGE> 34
below), currently the corporate trust office of the Trustee located initially
c/o First National Bank of Chicago, 14 Wall Street, Suite 4607, New York, New
York 10005. Payment of interest, if any, due on the Maturity Date of each
Certificated Note will be made to the person to whom payment of the principal
and premium, if any, shall be made. Payment of interest, if any, due on each
Certificated Note on any Interest Payment Date (as hereinafter defined) other
than the Maturity Date will be made at the office or agency referred to above
maintained by the Operating Partnership for such purpose or, at the option of
the Operating Partnership, may be made by check mailed to the address of the
Holder entitled thereto as such address shall appear in the Security Register of
the Operating Partnership at the close of business on the Record Date (as
hereinafter defined). Notwithstanding the foregoing, a Holder of $10,000,000
(or, if the applicable Specified Currency is other than United States dollars,
the equivalent thereof in such Specified Currency) or more in aggregate
principal amount of Notes (whether having identical or different terms and
provisions) will be entitled to receive interest payments on any Interest
Payment Date other than the Maturity Date by wire transfer of immediately
available funds if appropriate wire transfer instructions have been received in
writing by the Trustee not less than fifteen days prior to such Interest Payment
Date. Any such wire transfer instructions received by the Trustee shall remain
in effect until revoked by such Holder. For special payment terms applicable to
Foreign Currency Notes, see "Special Provisions Relating to Foreign Currency
Notes -- Payments of Principal, Premium, if any, and Interest."
As used herein, "Business Day" means any day, other than a Saturday or
Sunday that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law, regulation or executive order to close in The
City of New York; provided, however, that, with respect to Foreign Currency
Notes the payment of which is to be made in a currency or composite currency
other than United States dollars, such day is also not a day on which banking
institutions are authorized or required by law, regulation or executive order to
close in the Principal Financial Center (as hereinafter defined) of the country
issuing such currency or composite currency (or, in the case of European
Currency Units ("ECU"), is not a day that appears as an ECU non-settlement day
on the display designated as "ISDE" on the Reuter Monitor Money Rates Service
(or a day so designated by the ECU Banking Association) or, if ECU
non-settlement days do not appear on that page (and are not so designated), is
not a day on which payments in ECU cannot be settled in the international
interbank market); provided, further, that, with respect to Notes as to which
LIBOR is an applicable Interest Rate Basis, such day is also a London Business
Day (as hereinafter defined). "London Business Day" means (i) if the Index
Currency (as hereinafter defined) is other than ECU, any day on which dealings
in such Index Currency are transacted in the London interbank market or (ii) if
the Index Currency is ECU, any day that does not appear as an ECU non-settlement
day on the display designated as "ISDE" on the Reuter Monitor Money Rates
Service (or a day so designated by the ECU Banking Association) or, if ECU
non-settlement days do not appear on that page (and are not so designated), is
not a day on which payments in ECU cannot be settled in the international
interbank market.
"Principal Financial Center" means the capital city of the country issuing
the currency or composite currency in which any payment in respect of the
related Notes is to be made or, solely with respect to the calculation of LIBOR,
the Index Currency, except that with respect to United States dollars,
Australian dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs
and ECU's, the Principal Financial Center shall be The City of New York, Sydney,
Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "-- Book-Entry Notes." Registration of transfer or exchange of
Certificated Notes will be made at the office or agency maintained by the
Operating Partnership for such purpose in the Borough of Manhattan, The City of
New York. No service charge will be made by the Operating Partnership or the
Trustee for any such registration of transfer or exchange of Notes, but the
Operating Partnership may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith (other
than exchanges pursuant to the Indenture not involving any transfer).
Notwithstanding any provisions described in this Prospectus Supplement to
the contrary, if a Note specifies that an Addendum is attached thereto or that
"Other/Additional Provisions" apply, such Note will be subject to the terms
specified in such Addendum or "Other/Additional Provisions," as the case may be,
and will be described in the applicable Pricing Supplement.
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<PAGE> 35
REDEMPTION AT THE OPTION OF THE OPERATING PARTNERSHIP
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of the Operating Partnership prior to the Stated Maturity Date only if
agreed to by the Operating Partnership and the purchasers thereof at the time of
sale and an Initial Redemption Date is specified in the applicable Pricing
Supplement. If so specified, the Notes will be subject to redemption at the
option of the Operating Partnership on any date on and after the applicable
Initial Redemption Date in whole or from time to time in part in increments of
$1,000 or such other minimum denomination specified in such Pricing Supplement
(provided that any remaining principal amount thereof shall be at least $1,000
or such minimum denomination), at the applicable Redemption Price (as
hereinafter defined), together with unpaid interest accrued thereon to the date
of redemption, on notice given to the Holders thereof not more than 60 nor less
than 30 calendar days prior to the date of redemption and in accordance with the
provisions of the Indenture. "Redemption Price," with respect to a Note, means
an amount equal to the Initial Redemption Percentage specified in the applicable
Pricing Supplement (as adjusted by the Annual Redemption Percentage Reduction,
if applicable) multiplied by the unpaid principal amount to be redeemed. The
Initial Redemption Percentage, if any, applicable to a Note shall decline at
each anniversary of the Initial Redemption Date by an amount equal to the
applicable Annual Redemption Percentage Reduction, if any, until the Redemption
Price is equal to 100% of the unpaid principal amount to be redeemed. See also
"-- Original Issue Discount Notes."
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by the Operating Partnership at the option of
the Holders thereof prior to the Stated Maturity Date only if agreed to by the
Operating Partnership and the purchasers thereof at the time of sale and one or
more Optional Repayment Dates are specified in the applicable Pricing
Supplement. If so specified, the Notes will be subject to repayment at the
option of the Holders thereof on any Optional Repayment Date in whole or from
time to time in part in increments of $1,000 or such other minimum denomination
specified in the applicable Pricing Supplement (provided that any remaining
principal amount thereof shall be at least $1,000 or such other minimum
denomination), at a repayment price equal to 100% of the unpaid principal amount
to be repaid, together with unpaid interest accrued thereon to the date of
repayment, unless such Note is an Original Issue Discount Note, in which case
the Pricing Supplement will specify the amount payable upon such repayment. For
any Note to be repaid, such Note must be received, together with the form
thereon entitled "Option to Elect Repayment" duly completed, by the Trustee at
its Corporate Trust Office (or such other address of which the Operating
Partnership shall from time to time notify the Holders) not more than 60 nor
less than 30 calendar days prior to the date of repayment. Exercise of such
repayment option by the Holder will be irrevocable.
Only the Depositary may exercise the repayment option in respect of Global
Securities representing Book-Entry Notes. Accordingly, Beneficial Owners (as
hereinafter defined) of Global Securities that desire to have all or any portion
of the Book-Entry Notes represented by such Global Securities repaid must
instruct the Participant (as hereinafter defined) through which they own their
interest to direct the Depositary to exercise the repayment option on their
behalf by delivering the related Global Security and duly completed election
form to the Trustee as aforesaid. In order to ensure that such Global Security
and election form are received by the Trustee on a particular day, the
applicable Beneficial Owner must so instruct the Participant through which it
owns its interest before such Participant's deadline for accepting instructions
for that day. Different firms may have different deadlines for accepting
instructions from their customers. Accordingly, Beneficial Owners should consult
the Participants through which they own their interests for the respective
deadlines for such Participants. All instructions given to Participants from
Beneficial Owners of Global Securities relating to the option to elect repayment
shall be irrevocable. In addition, at the time such instructions are given, each
such Beneficial Owner shall cause the Participant through which it owns its
interest to transfer such Beneficial Owner's interest in the Global Security or
Securities representing the related Book-Entry Notes, on the Depositary's
records, to the Trustee. See "-- Book-Entry Notes."
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<PAGE> 36
If applicable, the Operating Partnership will comply with the requirements
of Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and any other securities laws or regulations in connection with
any such repayment.
The Operating Partnership may at any time purchase Notes at any price or
prices in the open market or otherwise. Notes so purchased by the Operating
Partnership may, at the discretion of the Operating Partnership, be held, resold
or surrendered to the Trustee for cancellation.
INTEREST
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest from its date of issue at the rate per
annum, in the case of a Fixed Rate Note, or pursuant to the interest rate
formula, in the case of a Floating Rate Note, in each case as specified in the
applicable Pricing Supplement, until the principal thereof is paid or duly made
available for payment. Unless otherwise specified in the applicable Pricing
Supplement, interest payments in respect of Fixed Rate Notes and Floating Rate
Notes will equal the amount of interest accrued from and including the
immediately preceding Interest Payment Date in respect of which interest has
been paid or duly made available for payment (or from and including the date of
issue, if no interest has been paid or duly made available for payment with
respect to the applicable Note) to but excluding the applicable Interest Payment
Date or the Maturity Date, as the case may be (each, an "Interest Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable in
arrears on each Interest Payment Date and on the Maturity Date. Unless otherwise
specified in the applicable Pricing Supplement, the first payment of interest on
any such Note originally issued between a Record Date (as hereinafter defined)
and the related Interest Payment Date will be made on the Interest Payment Date
immediately following the next succeeding Record Date to the Holder on such next
succeeding Record Date. Unless otherwise specified in the applicable Pricing
Supplement, a "Record Date" shall be the fifteenth calendar day (whether or not
a Business Day) immediately preceding the related Interest Payment Date.
FIXED RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, interest
on Fixed Rate Notes will be payable on May 1 and November 1 of each year (each,
an "Interest Payment Date") and on the Maturity Date. Unless otherwise specified
in the applicable Pricing Supplement, interest on Fixed Rate Notes will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next succeeding Business
Day with the same force and effect as if made on the date such payment was due,
and no interest will accrue with respect to such payment for the period from and
after such Interest Payment Date or the Maturity Date, as the case may be, to
the date of such payment on the next succeeding Business Day.
FLOATING RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing Supplement
will specify certain terms with respect to which each Floating Rate Note is
being delivered, including: whether such Floating Rate Note is a "Regular
Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating
Rate Note," the Fixed Rate Commencement Date, if applicable, Fixed Interest
Rate, if applicable, Interest Rate Basis or Bases, Initial Interest Rate, if
any, Interest Reset Period and Dates, Interest Payment Period and Dates, Index
Maturity, Maximum Interest Rate and/or Minimum Interest Rate, if any, and Spread
and/or Spread Multiplier, if any, as such terms are defined below. If one or
more of the applicable Interest Rate Bases is LIBOR or the CMT Rate, the
applicable Pricing Supplement will specify the Index Currency and Designated
LIBOR Page or the
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Designated CMT Maturity Index and Designated CMT Telerate Page, respectively, as
such terms are defined below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," an "Inverse Floating Rate Note" or as having an
Addendum attached or having "Other/Additional Provisions" apply, such
Floating Rate Note will be designated as a "Regular Floating Rate Note"
and, except as set forth below or in the applicable Pricing Supplement,
will bear interest at the rate determined by reference to the applicable
Interest Rate Basis or Bases (a) plus or minus the applicable Spread, if
any, and/or (b) multiplied by the applicable Spread Multiplier, if any.
Commencing on the first Interest Reset Date, the rate at which interest on
such Regular Floating Rate Note shall be payable shall be reset as of each
Interest Reset Date; provided, however, that the interest rate in effect
for the period, if any, from the date of issue to the first Interest Reset
Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as set forth below or in the applicable
Pricing Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the first Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (y) the interest rate in effect for the period, if
any, from the date of issue to the first Interest Reset Date will be the
Initial Interest Rate and (z) the interest rate in effect for the period
commencing on the Fixed Rate Commencement Date to the Maturity Date shall
be the Fixed Interest Rate, if such rate is specified in the applicable
Pricing Supplement or, if no such Fixed Interest Rate is specified, the
interest rate in effect thereon on the day immediately preceding the Fixed
Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as set forth below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the Fixed
Interest Rate minus the rate determined by reference to the applicable
Interest Rate Basis or Bases (a) plus or minus the applicable Spread, if
any, and/or (b) multiplied by the applicable Spread Multiplier, if any;
provided, however, that, unless otherwise specified in the applicable
Pricing Supplement, the interest rate thereon will not be less than zero.
Commencing on the first Interest Reset Date, the rate at which interest on
such Inverse Floating Rate Note shall be payable shall be reset as of each
Interest Reset Date; provided, however, that the interest rate in effect
for the period, if any, from the date of issue to the first Interest Reset
Date will be the Initial Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest Rate
Basis or Bases will be multiplied to determine the applicable interest rate on
such Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the related Interest Rate Basis
or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as hereinafter defined) immediately preceding
such Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date (or, if none, the Initial Interest
Rate).
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds Rate,
(vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such other
Interest Rate Basis or interest
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rate formula as may be specified in the applicable Pricing Supplement; provided,
however, that the interest rate in effect on a Floating Rate Note for the
period, if any, from the date of issue to the first Interest Reset Date will be
the Initial Interest Rate; provided further, that with respect to a Floating
Rate/Fixed Rate Note the interest rate in effect for the period commencing on
the Fixed Rate Commencement Date to the Maturity Date shall be the Fixed
Interest Rate, if such rate is specified in the applicable Pricing Supplement
or, if no such Fixed Interest Rate is specified, the interest rate in effect
thereon on the day immediately preceding the Fixed Rate Commencement Date.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually or on such other specified basis (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Dates will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating Rate
Notes as to which the Eleventh District Cost of Funds Rate is an applicable
Interest Rate Basis, which will reset on the first calendar day of the month);
(iv) quarterly, the third Wednesday of March, June, September and December of
each year, (v) semiannually, the third Wednesday of the two months specified in
the applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement; provided, however, that,
with respect to Floating Rate/Fixed Rate Notes, the rate of interest thereon
will not reset after the applicable Fixed Rate Commencement Date. If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Reset Date will be postponed to the next
succeeding Business Day, except that in the case of a Floating Rate Note as to
which LIBOR is an applicable Interest Rate Basis and such Business Day falls in
the next succeeding calendar month, such Interest Reset Date will be the
immediately preceding Business Day.
The interest rate applicable to each Interest Reset Period commencing on
the related Interest Reset Date will be the rate determined as of the applicable
Interest Determination Date on or prior to the Calculation Date (as hereinafter
defined). The "Interest Determination Date" with respect to the CD Rate, the CMT
Rate, the Commercial Paper Rate, the Federal Funds Rate and the Prime Rate will
be the second Business Day immediately preceding the applicable Interest Reset
Date; the "Interest Determination Date" with respect to the Eleventh District
Cost of Funds Rate will be the last working day of the month immediately
preceding the applicable Interest Reset Date on which the Federal Home Loan Bank
of San Francisco (the "FHLB of San Francisco") publishes the Index (as
hereinafter defined); and the "Interest Determination Date" with respect to
LIBOR will be the second London Business Day immediately preceding the
applicable Interest Reset Date, unless the Index Currency is British pounds
sterling, in which case the "Interest Determination Date" will be the applicable
Interest Reset Date. The "Interest Determination Date" with respect to the
Treasury Rate will be the day in the week in which the applicable Interest Reset
Date falls on which day Treasury Bills (as hereinafter defined) are normally
auctioned (Treasury Bills are normally sold at an auction held on Monday of each
week, unless that day is a legal holiday, in which case the auction is normally
held on the following Tuesday, except that such auction may be held on the
preceding Friday); provided, however, that if an auction is held on the Friday
of the week preceding the applicable Interest Reset Date, the Interest
Determination Date will be such preceding Friday; provided, further, that if an
auction falls on the applicable Interest Reset Date, then the Interest Reset
Date will instead be the first Business Day following such auction. If the
interest rate of a Floating Rate Note is determined by reference to two or more
Interest Rate Bases, the "Interest Determination Date" pertaining to such
Floating Rate Note will be the most recent Business Day which is at least two
Business Days prior to the applicable Interest Reset Date for such Floating Rate
Note on which each Interest Rate Basis is determinable. Each Interest Rate Basis
will be determined as of such date, and the applicable interest rate will take
effect on the applicable Interest Reset Date.
A Floating Rate Note may also have either or both of the following: (i) a
Maximum Interest Rate, or ceiling, that may accrue during any Interest Period
and (ii) a Minimum Interest Rate, or floor, that may
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accrue during any Interest Period. In addition to any Maximum Interest Rate that
may apply to any Floating Rate Note, the interest rate on Floating Rate Notes
will in no event be higher than the maximum rate permitted by New York law, as
the same may be modified by United States law of general application. Under
current New York law, the maximum rate of interest, subject to certain
exceptions, for any loan in an amount less than $250,000 is 16% and for any loan
in the amount of $250,000 or more but less than $2,500,000 is 25% per annum on a
simple interest basis. These limits do not apply to loans of $2,500,000 or more.
Except as provided below or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of
March, June, September and December of each year, (iii) semiannually, on the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and (iv) annually, on the third Wednesday of the month of
each year specified in the applicable Pricing Supplement (each, an "Interest
Payment Date") and, in each case, on the Maturity Date. If any Interest Payment
Date other than the Maturity Date for any Floating Rate Note would otherwise be
a day that is not a Business Day, such Interest Payment Date will be postponed
to the next succeeding Business Day, except that in the case of a Floating Rate
Note as to which LIBOR is an applicable Interest Rate Basis and such Business
Day falls in the next succeeding calendar month, such Interest Payment Date will
be the immediately preceding Business Day. If the Maturity Date of a Floating
Rate Note falls on a day that is not a Business Day, the required payment of
principal, premium, if any, and interest will be made on the next succeeding
Business Day with the same force and effect as if made on the date such payment
was due, and no interest will accrue on such payment for the period from and
after the Maturity Date to the date of such payment on the next succeeding
Business Day.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of United States dollars, to the nearest cent or, in the case of a
foreign currency or composite currency, to the nearest unit (with one-half cent
or unit being rounded upwards).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the applicable Interest Period. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each such day will be
computed by dividing the interest rate applicable to such day by 360, in the
case of Floating Rate Notes for which an applicable Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of days
in the year in the case of Floating Rate Notes for which an applicable Interest
Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise specified in
the applicable Pricing Supplement, the interest factor for Floating Rate Notes
for which the interest rate is calculated with reference to two or more Interest
Rate Bases will be calculated in each period in the same manner as if only one
of the applicable Interest Rate Bases applied as specified in the applicable
Pricing Supplement.
The "Calculation Agent" with respect to each issuance of Floating Rate
Notes will be named in the applicable Pricing Supplement. Upon request of the
Holder of any Floating Rate Note, the Calculation Agent will disclose the
interest rate then in effect and, if determined, the interest rate that will
become effective as a result of a determination made for the next succeeding
Interest Reset Date with respect to such Floating Rate Note. Unless otherwise
specified in the applicable Pricing Supplement, the "Calculation Date," if
applicable, pertaining to any Interest Determination Date will be the earlier of
(i) the tenth calendar day after such Interest Determination Date, or, if such
day is not a Business Day, the next succeeding Business Day or (ii) the Business
Day immediately preceding the applicable Interest Payment Date or the Maturity
Date, as the case may be.
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Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance with
the following provisions.
CD Rate. Unless otherwise specified in the applicable Pricing Supplement,
"CD Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CD Rate (a "CD Rate Interest Determination Date"), the rate on such date for
negotiable United States dollar certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)")
under the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such CD Rate
Interest Determination Date for negotiable United States dollar certificates of
deposit of the Index Maturity specified in the applicable Pricing Supplement as
published by the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 P.M. Quotations for United States Government Securities"
or any successor publication ("Composite Quotations") under the heading
"Certificates of Deposit." If such rate is not yet published in either H.15(519)
or Composite Quotations by 3:00 P.M., New York City time, on the related
Calculation Date, then the CD Rate on such CD Rate Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean of
the secondary market offered rates as of 10:00 A.M., New York City time, on such
CD Rate Interest Determination Date, of three leading nonbank dealers in
negotiable United States dollar certificates of deposit in The City of New York
(which may include an Agent or its affiliates) selected by the Calculation Agent
for negotiable United States dollar certificates of deposit of major United
States money market banks for negotiable certificates of deposit with a
remaining maturity closest to the Index Maturity specified in the applicable
Pricing Supplement in an amount that is representative for a single transaction
in that market at that time; provided, however, that if the dealers so selected
by the Calculation Agent are not quoting as mentioned in this sentence, the CD
Rate determined as of such CD Rate Interest Determination Date will be the CD
Rate in effect on such CD Rate Interest Determination Date.
CMT Rate. Unless otherwise specified in the applicable Pricing Supplement,
"CMT Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CMT Rate (a "CMT Rate Interest Determination Date"), the rate displayed on
the Designated CMT Telerate Page (as hereinafter defined) under the caption
". . . Treasury Constant Maturities . . . Federal Reserve Board Release
H.15 . . . Mondays Approximately 3:45 P.M.," under the column for the Designated
CMT Maturity Index for (i) if the Designated CMT Telerate Page is 7055, the rate
on such CMT Rate Interest Determination Date and (ii) if the Designated CMT
Telerate Page is 7052, the weekly, or monthly average, as specified in the
applicable Pricing Supplement for the week, or the month, as applicable, ended
immediately preceding the week or the month, as applicable, in which the related
CMT Rate Interest Determination Date occurs. If such rate is no longer displayed
on the relevant page or is not displayed by 3:00 P.M., New York City time, on
the related Calculation Date, then the CMT Rate for such CMT Rate Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519). If such
rate is no longer published or is not published by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate on such CMT Rate
Interest Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date with
respect to such Interest Reset Date as may then be published by either the Board
of Governors of the Federal Reserve System or the United States Department of
the Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate on the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be a yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 P.M., New York City time, on
such CMT Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each, a "Reference Dealer") in The City of New York (which may include an Agent
or its affiliates) selected by the Calculation Agent (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of
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equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for the most recently issued direct noncallable
fixed rate obligations of the United States ("Treasury Notes") with an original
maturity of approximately the Designated CMT Maturity Index and a remaining term
to maturity of not less than such Designated CMT Maturity Index minus one year.
If the Calculation Agent is unable to obtain three such Treasury Note
quotations, the CMT Rate on such CMT Rate Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on the
arithmetic mean of the secondary market offer side prices as of approximately
3:30 P.M., New York City time, on such CMT Rate Interest Determination Date of
three Reference Dealers in The City of New York (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest quotation (or,
in the event of equality, one of the lowest)), for Treasury Notes with an
original maturity of the number of years that is the next highest to the
Designated CMT Maturity Index and a remaining term to maturity closest to the
Designated CMT Maturity Index and in an amount of at least $100 million. If
three or four (and not five) of such Reference Dealers are quoting as described
above, then the CMT Rate will be based on the arithmetic mean of the offer
prices obtained and neither the highest nor the lowest of such quotes will be
eliminated; provided, however, that if fewer than three Reference Dealers so
selected by the Calculation Agent are quoting as mentioned herein, the CMT Rate
determined as of such CMT Rate Interest Determination Date will be the CMT Rate
in effect on such CMT Rate Interest Determination Date. If two Treasury Notes
with an original maturity as described in the second preceding sentence have
remaining terms to maturity equally close to the Designated CMT Maturity Index,
the quotes for the Treasury Note with the shorter remaining term to maturity
will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service (or any successor service) on the page specified in the applicable
Pricing Supplement (or any other page as may replace such page on that service
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519)) for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519). If no such page is specified in the applicable Pricing
Supplement, the Designated CMT Telerate Page shall be 7052, for the most recent
week.
"Designated CMT Maturity Index" means the original period to maturity of
the United States Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
Commercial Paper Rate. Unless otherwise specified in the applicable
Pricing Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Commercial Paper Rate (a "Commercial Paper
Rate Interest Determination Date"), the Money Market Yield (as hereinafter
defined) on such date of the rate for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "Commercial Paper -- Nonfinancial." In the event that such rate is
not published by 3:00 P.M., New York City time, on the related Calculation Date,
then the Commercial Paper Rate on such Commercial Paper Rate Interest
Determination Date will be the Money Market Yield of the rate for commercial
paper having the Index Maturity specified in the applicable Pricing Supplement
as published in Composite Quotations under the heading "Commercial Paper" (with
an Index Maturity of one month or three months being deemed to be equivalent to
an Index Maturity of 30 days or 90 days, respectively). If such rate is not yet
published in either H.15(519) or Composite Quotations by 3:00 P.M., New York
City time, on the related Calculation Date, then the Commercial Paper Rate on
such Commercial Paper Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
commercial paper in The City of New York (which may include an Agent or its
affiliates) selected by the Calculation Agent for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement placed for an
industrial issuer whose bond rating is "Aa", or the equivalent, from a
nationally recognized statistical rating organization; provided, however, that
if the dealers so selected by the Calculation Agent are not quoting as mentioned
in this sentence, the Commercial Paper Rate determined as of such Commercial
Paper Rate
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Interest Determination Date will be the Commercial Paper Rate in effect on such
Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated
in accordance with the following formula:
<TABLE>
<S> <C> <C>
D X 360
Money Market Yield = -------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Interest Period for which interest is being calculated.
Eleventh District Cost of Funds Rate. Unless otherwise specified in the
applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate Note
for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls, as set
forth under the caption "11th District" on Telerate Page 7058 as of 11:00 A.M.,
San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on such
Eleventh District Cost of Funds Rate Interest Determination Date, then the
Eleventh District Cost of Funds Rate on such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month immediately preceding
such Eleventh District Cost of Funds Rate Interest Determination Date. If the
FHLB of San Francisco fails to announce the Index on or prior to such Eleventh
District Cost of Funds Rate Interest Determination Date for the calendar month
immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date, the Eleventh District Cost of Funds Rate determined as of
such Eleventh District Cost of Funds Rate Interest Determination Date will be
the Eleventh District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date.
Federal Funds Rate. Unless otherwise specified in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, then the Federal Funds Rate on such Federal Funds Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be the arithmetic mean of the rates for the last transaction in overnight United
States dollar federal funds arranged by three leading brokers of federal funds
transactions in The City of New York (which may include an Agent or its
affiliates) selected by the Calculation Agent prior to 9:00 A.M., New York City
time, on such Federal Funds Rate Interest Determination Date; provided, however,
that if the brokers so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Federal Funds Rate determined as of such Federal
Funds Rate Interest Determination Date will be the Federal Funds Rate in effect
on such Federal Funds Rate Interest Determination Date.
LIBOR. Unless otherwise specified in the applicable Pricing Supplement,
"LIBOR" means the rate determined in accordance with the following provisions:
(i) With respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference
to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will be either: (a)
if "LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic
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mean of the offered rates (unless the Designated LIBOR Page (as hereinafter
defined) by its terms provides only for a single rate, in which case such
single rate shall be used) for deposits in the Index Currency having the
Index Maturity specified in such Pricing Supplement, commencing on the
applicable Interest Reset Date, that appear (or, if only a single rate is
required as aforesaid, appears) on the Designated LIBOR Page as of 11:00
A.M., London time, on such LIBOR Interest Determination Date, or (b) if
"LIBOR Telerate" is specified in the applicable Pricing Supplement, or if
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable
Pricing Supplement as the method for calculating LIBOR, the rate for
deposits in the Index Currency having the Index Maturity specified in such
Pricing Supplement, commencing on such Interest Reset Date, that appears on
the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date. If fewer than two such offered rates appear,
or if no such rate appears, as applicable, LIBOR on such LIBOR Interest
Determination Date will be determined in accordance with the provisions
described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear, or no rate appears, as the case may
be, on the Designated LIBOR Page as specified in clause (i) above, the
Calculation Agent will request the principal London offices of each of four
major reference banks (which may include affiliates of the Agents) in the
London interbank market, as selected by the Calculation Agent, to provide
the Calculation Agent with its offered quotation for deposits in the Index
Currency for the period of the Index Maturity specified in the applicable
Pricing Supplement, commencing on the applicable Interest Reset Date, to
prime banks in the London interbank market at approximately 11:00 A.M.,
London time, on such LIBOR Interest Determination Date and in a principal
amount that is representative for a single transaction in such Index
Currency in such market at such time. If at least two such quotations are
so provided, then LIBOR on such LIBOR Interest Determination Date will be
the arithmetic mean of such quotations. If fewer than two such quotations
are so provided, then LIBOR on such LIBOR Interest Determination Date will
be the arithmetic mean of the rates quoted at approximately 11:00 A.M., in
the applicable Principal Financial Center, on such LIBOR Interest
Determination Date by three major banks (which may include affiliates of
the Agents) in such Principal Financial Center selected by the Calculation
Agent for loans in the Index Currency to leading European banks, having the
Index Maturity specified in the applicable Pricing Supplement and in a
principal amount that is representative for a single transaction in such
Index Currency in such market at such time; provided, however, that if the
banks so selected by the Calculation Agent are not quoting as mentioned in
this sentence, LIBOR determined as of such LIBOR Interest Determination
Date will be LIBOR in effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency or composite currency specified in the
applicable Pricing Supplement as to which LIBOR shall be calculated. If no such
currency or composite currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page as may replace such page on such service) for the
purpose of displaying the London interbank rates of major banks for the
applicable Index Currency, or (b) if "LIBOR Telerate" is specified in the
applicable Pricing Supplement or neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Pricing Supplement as the method for calculating
LIBOR, the display on the Dow Jones Telerate Service (or any successor service)
on the page specified in such Pricing Supplement (or any other page as may
replace such page on such service) for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency.
Prime Rate. Unless otherwise specified in the applicable Pricing
Supplement, "Prime Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the Prime Rate (a "Prime Rate Interest Determination Date"), the
rate on such date as such rate is published in H.15(519) under the heading "Bank
Prime Loan." If such rate is not published prior to 3:00 P.M., New York City
time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters
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Screen USPRIME1 Page (as hereinafter defined) as such bank's prime rate or base
lending rate as in effect for such Prime Rate Interest Determination Date. If
fewer than four such rates appear on the Reuters Screen USPRIME1 Page for such
Prime Rate Interest Determination Date, then the Prime Rate shall be the
arithmetic mean of the prime rates or base lending rates quoted on the basis of
the actual number of days in the year divided by a 360-day year as of the close
of business on such Prime Rate Interest Determination Date by four major money
center banks (which may include affiliates of the Agents) in The City of New
York selected by the Calculation Agent. If fewer than four such quotations are
so provided, then the Prime Rate shall be the arithmetic mean of four prime
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date as furnished in The City of New York by the major money
center banks, if any, that have provided such quotations and by as many
substitute banks or trust companies (which may include affiliates of the Agents)
as necessary to obtain four such prime rate quotations, provided such substitute
banks or trust companies are organized and doing business under the laws of the
United States, or any State thereof, each having total equity capital of at
least U.S. $500 million and being subject to supervision or examination by
Federal or State authority, selected by the Calculation Agent to provide such
rate or rates; provided, however, that if the banks or trust companies so
selected by the Calculation Agent are not quoting as mentioned in this sentence,
the Prime Rate determined as of such Prime Rate Interest Determination Date will
be the Prime Rate in effect on such Prime Rate Interest Determination Date.
"Reuters Screen USPRIME1 Page" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "USPRIME1" page (or such
other page as may replace the USPRIME1 page on that service for the purpose of
displaying prime rates or base lending rates of major United States banks).
Treasury Rate. Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is determined
by reference to the Treasury Rate (a "Treasury Rate Interest Determination
Date"), the rate from the auction held on such Treasury Rate Interest
Determination Date (the "Auction") of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified in the applicable Pricing
Supplement, as such rate is published in H.15(519) under the heading "Treasury
Bills-auction average (investment)" or, if not published by 3:00 P.M., New York
City time, on the related Calculation Date, the auction average rate of such
Treasury Bills (expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury. In the event that the results of
the Auction of Treasury Bills having the Index Maturity specified in the
applicable Pricing Supplement are not reported as provided by 3:00 P.M., New
York City time, on the related Calculation Date, or if no such Auction is held,
then the Treasury Rate will be calculated by the Calculation Agent and will be a
yield to maturity (expressed as a bond equivalent on the basis of a year of 365
or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 P.M., New York City
time, on such Treasury Rate Interest Determination Date, of three leading
primary United States government securities dealers (which may include an Agent
or its affiliates) selected by the Calculation Agent, for the issue of Treasury
Bills with a remaining maturity closest to the Index Maturity specified in the
applicable Pricing Supplement; provided, however, that if the dealers so
selected by the Calculation Agent are not quoting as mentioned in this sentence,
the Treasury Rate determined as of such Treasury Rate Interest Determination
Date will be the Treasury Rate in effect on such Treasury Rate Interest
Determination Date.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the specification and
determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Rate Note, the Interest Payment Dates,
the Maturity Date, any redemption or repayment provisions or any other term
relating thereto, may be modified and/or supplemented as specified under
"Other/Additional Provisions" on the face thereof or in an Addendum relating
thereto, if so specified on the face thereof and in the applicable Pricing
Supplement.
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AMORTIZING NOTES
The Operating Partnership may from time to time offer Fixed Rate Notes
which pay a level amount in respect of both interest and principal amortized
over the life of such Fixed Rate Notes ("Amortizing Notes"). Unless otherwise
specified in the applicable Pricing Supplement, interest on each Amortizing Note
will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. Further information concerning additional terms and provisions of
Amortizing Notes will be specified in the applicable Pricing Supplement,
including a table setting forth repayment information for such Amortizing Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Operating Partnership may offer Notes ("Original Issue Discount Notes")
from time to time that have an Issue Price (as specified in the applicable
Pricing Supplement) that is less than 100% of the principal amount thereof
(i.e., par). Original Issue Discount Notes may not bear any interest currently
or may bear interest at a rate that is below market rates at the time of
issuance. Unless otherwise specified in the applicable Pricing Supplement, the
difference between the Issue Price of an Original Issue Discount Note and par is
referred to herein as the "Discount" and will be ratably accrued over the term
of such Original Issue Discount Note for purposes of determining the amount to
be paid in the event of redemption, repayment or acceleration of maturity of
such Original Issue Discount Note. In the event of redemption, repayment or
acceleration of maturity of an Original Issue Discount Note, the amount payable
to the Holder of such Original Issue Discount Note will be equal to the sum of:
(i) the Issue Price (increased by any accruals of Discount) and, in the event of
any redemption of such Original Issue Discount Note (if applicable), multiplied
by the Initial Redemption Percentage specified in the applicable Pricing
Supplement (as adjusted by the Annual Redemption Percentage Reduction, if
applicable); and (ii) any accrued and unpaid interest on such Original Issue
Discount Note, from the date of issue to the date of redemption, repayment or
acceleration of maturity. Certain additional considerations relating to Original
Issue Discount Notes may be specified in the applicable Pricing Supplement. The
accrual of the applicable discount may differ from the accrual of original issue
discount for federal income tax purposes. See "Certain United States Federal
Income Tax Considerations."
INDEXED NOTES
The Operating Partnership may from time to time offer Notes with the amount
of principal, premium and/or interest payable in respect thereof to be
determined with reference to the price or prices of specified commodities or
stocks, to the exchange rate of one or more specified currencies (including a
composite currency such as the ECU) relative to an indexed currency or to such
other price(s) or exchange rate(s) ("Indexed Notes"), as specified in the
applicable Pricing Supplement. In certain cases, Holders of Indexed Notes may
receive a principal payment on the Maturity Date that is greater than or less
than the principal amount of such Indexed Notes depending upon the relative
value on the Maturity Date of the specified indexed item. Information as to the
method for determining the amount of principal, premium, if any, and/or
interest, if any, payable in respect of Indexed Notes, certain historical
information with respect to the specified indexed item and any material tax
considerations associated with an investment in Indexed Notes will be specified
in the applicable Pricing Supplement. See also "Risk Factors."
BOOK-ENTRY NOTES
The Operating Partnership has established a depositary arrangement with The
Depository Trust Company with respect to the Book-Entry Notes, the terms of
which are summarized below. Any additional or differing terms of the depositary
arrangement with respect to the Book-Entry Notes will be described in the
applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes up to $344,000,000 aggregate principal
amount bearing interest (if any) at the same rate or pursuant to the same
formula and having the same date of issue, currency of denomination and payment,
Interest Payment Dates (if any), Stated Maturity Date, redemption provisions (if
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<PAGE> 46
any), repayment provisions (if any) and other terms will be represented by a
single Global Security. Each Global Security representing Book-Entry Notes will
be deposited with, or on behalf of, the Depositary and will be registered in the
name of the Depositary or a nominee of the Depositary. No Global Security may be
transferred except as a whole by a nominee of the Depositary to the Depositary
or to another nominee of the Depositary, or by the Depositary or such nominee to
a successor of the Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a
Global Security, the Depositary or its nominee, as the case may be, will be the
sole Holder of the Book-Entry Notes represented thereby for all purposes under
the Indenture. Except as otherwise provided in this section, the Beneficial
Owners of the Global Security or Securities representing Book-Entry Notes will
not be entitled to receive physical delivery of Certificated Notes and will not
be considered the Holders thereof for any purpose under the Indenture, and no
Global Security representing Book-Entry Notes shall be exchangeable or
transferrable. Accordingly, each Beneficial Owner must rely on the procedures of
the Depositary and, if such Beneficial Owner is not a Participant, on the
procedures of the Participant through which such Beneficial Owner owns its
interest in order to exercise any rights of a Holder under such Global Security
or the Indenture. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in certificated form.
Such limits and such laws may impair the ability to transfer beneficial
interests in a Global Security representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing Supplement, each
Global Security representing Book-Entry Notes will be exchangeable for
Certificated Notes of like tenor and terms and of differing authorized
denominations aggregating a like principal amount, only if (i) the Depositary
notifies the Operating Partnership that it is unwilling or unable to continue as
Depositary for the Global Securities or the Depositary ceases to be a clearing
agency registered under the Exchange Act (if so required by applicable law or
regulation) and, in each case, a successor Depositary is not appointed by the
Operating Partnership within 90 days after the Operating Partnership receives
such notice or becomes aware of such unwillingness, inability or ineligibility,
(ii) the Operating Partnership in its sole discretion determines that the Global
Securities shall be exchangeable for Certificated Notes or (iii) there shall
have occurred and be continuing an Event of Default under the Indenture with
respect to the Notes and beneficial owners representing a majority in aggregate
principal amount of the Book-Entry Notes represented by Global Securities advise
the Depositary to cease acting as depositary. Upon any such exchange, the
Certificated Notes shall be registered in the names of the Beneficial Owners of
the Global Security or Securities representing Book-Entry Notes, which names
shall be provided by the Depositary's relevant Participants (as identified by
the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully registered securities
registered in the name of Cede & Co. (the Depositary's partnership
nominee). One fully registered Global Security will be issued for each
issue of Book-Entry Notes, each in the aggregate principal amount of such
issue, and will be deposited with the Depositary. If, however, the
aggregate principal amount of any issue exceeds $200,000,000, one Global
Security will be issued with respect to each $200,000,000 of principal
amount and an additional Global Security will be issued with respect to any
remaining principal amount of such issue.
The Depositary is a limited-purpose trust company organized under the
Banking Law of the State of New York, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. The Depositary was created
to hold securities of its participants and to facilitate the clearance and
settlement of transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants,
thereby eliminating the need for physical movement of securities
certificates. The Depositary's participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations, ("Direct Participants") some of which (and/or their
representatives) own the Depositary. Access to the Depositary book-entry
system is also available to others, such as banks, brokers, and dealers and
trust companies that clear
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through or maintain a custodial relationship with a participant, either
directly or indirectly ("Indirect Participants").
Purchases of Book-Entry Notes under the Depositary's system must be
made by or through Direct Participants, which will receive a credit for
such Book-Entry Notes on the Depositary's records. The ownership interest
of each actual purchaser of each Book-Entry Note represented by a Global
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in a Global Security
representing Book-Entry Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners of a Global Security representing Book-Entry Notes will not receive
Certificated Notes representing their ownership interests therein, except
in the event that use of the Book-Entry system for such Book-Entry Notes is
discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes which are deposited with, or on behalf of, the Depositary
are registered in the name of the Depositary's nominee, Cede & Co. The
deposit of Global Securities with, or on behalf of, the Depositary and
their registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depositary has no knowledge of the actual Beneficial Owners
of the Global Securities representing the Book-Entry Notes; the
Depositary's records reflect only the identity of the Direct Participants
to whose accounts such Book Entry Notes are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with
respect to the Global Securities representing the Book-Entry Notes. Under
its usual procedures, the Depositary mails an Omnibus Proxy to the
Operating Partnership as soon as possible after the applicable record date.
The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Book-Entry Notes are credited on
the applicable record date (identified in a listing attached to the Omnibus
Proxy).
Principal, premium, if any, and/or interest, if any, payments on the
Global Securities representing the Book Entry Notes will be made to the
Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the applicable payment date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has reason
to believe that it will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of the Depositary,
the Trustee or the Operating Partnership, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal, premium, if any, and/or interest to the Depositary is the
responsibility of the Operating Partnership or the Trustee, disbursement of
such payments to Direct Participants shall be the responsibility of the
Depositary, and disbursement of such payments to the Beneficial Owners
shall be the responsibility of Direct and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the Book-Entry Notes within an issue are being redeemed, the
Depositary's practice is to determine by lot the amount of the interest of
each Direct Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have
its Book-Entry Notes repaid by the Operating Partnership, through its
Participant, to the Trustee, and shall effect delivery of such Book
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Entry Notes by causing the Direct Participant to transfer the Participant's
interest in the Global Security or Securities representing such Book-Entry
Notes, on the Depositary's records, to the Trustee. The requirement for
physical delivery of Book-Entry Notes in connection with a demand for
repayment will be deemed satisfied when the ownership rights in the Global
Security or Securities representing such Book-Entry Notes are transferred
by Direct Participants on the Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Operating Partnership or the Trustee. Under such
circumstances, in the event that a successor securities depository is not
obtained, Certificated Notes are required to be printed and delivered.
The Operating Partnership may decide to discontinue use of the system
of book-entry transfers through the Depositary (or a successor securities
depository). In that event, Certificated Notes will be printed and
delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Operating
Partnership believes to be reliable, but the Operating Partnership takes no
responsibility for the accuracy thereof. None of the Operating Partnership, any
Agents, the Trustee or the registrar for the Notes will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
CERTAIN COVENANTS
Limitations on Incurrence of Debt. The Operating Partnership will not, and
will not permit any Subsidiary to, incur any Debt (as defined below), other than
intercompany Debt (representing Debt to which the only parties are the Company,
the Operating Partnership and any of their Subsidiaries, but only so long as
such Debt is held solely by any of the Company, the Operating Partnership and
any Subsidiary) if, immediately after giving effect to the incurrence of such
additional Debt, the aggregate principal amount of all outstanding Debt of the
Operating Partnership and its Subsidiaries on a consolidated basis determined in
accordance with generally accepted accounting principles is greater than 60% of
the sum of (i) Total Assets (as defined below) as of the end of the fiscal
quarter covered in the Operating Partnership's Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, most recently filed with the
Securities and Exchange Commission (or, if such filing is not permitted under
the Exchange Act, with the Trustee) prior to the incurrence of such additional
Debt and (ii) the increase in Total Assets from the end of such quarter
including, without limitation, any increase in Total Assets resulting from the
incurrence of such additional Debt (such increase together with the Operating
Partnership's Total Assets is referred to as the "Adjusted Total Assets").
In addition to the foregoing limitation on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Secured Debt of the Operating Partnership or any Subsidiary if, immediately
after giving effect to the incurrence of such additional Secured Debt, the
aggregate principal amount of all outstanding Secured Debt of the Operating
Partnership and its Subsidiaries on a consolidated basis is greater than 40% of
Adjusted Total Assets. Debt shall be deemed to be "incurred" by the Operating
Partnership and its Subsidiaries on a consolidated basis whenever the Operating
Partnership and its Subsidiaries on a consolidated basis shall create, assume,
guarantee or otherwise become liable in respect thereof.
In addition to the foregoing limitations on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Debt, other than intercompany Debt, if the ratio of Consolidated Income
Available for Debt Service to the Annual Debt Service Charge (in each case as
defined below) for the period consisting of the four consecutive fiscal quarters
most recently ended prior to the date on which such additional Debt is to be
incurred shall have been less than 1.5 to 1, on a pro forma basis after giving
effect to the incurrence of such Debt and to the application of the proceeds
therefrom, and calculated on the assumption that (i) such Debt and any other
Debt incurred by the Operating Partnership or its Subsidiaries since the first
day of such four-quarter period and the application of the proceeds therefrom,
including to refinance other Debt, had occurred at the beginning of such period,
(ii) the repayment or retirement of any other Debt by the Operating Partnership
or its Subsidiaries since the first day of such four-quarter period had
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been repaid or retired at the beginning of such period (except that, in making
such computation, the amount of Debt under any revolving credit facility shall
be computed based upon the average daily balance of such Debt during such
period), and (iii) in the case of any increase or decrease in Total Assets, or
any other acquisition or disposition by the Operating Partnership or any
Subsidiary of any asset or group of assets, since the first day of such
four-quarter period, including, without limitation, by merger, stock purchase or
sale, or asset purchase or sale, such increase, decrease, or other acquisition
or disposition or any related repayment of Debt had occurred as of the first day
of such period with the appropriate adjustments to net income and Debt levels
with respect to such increase, decrease, or other acquisition or disposition
being included in such pro forma calculation. For purposes of the adjustments
referred to in clause (iii) of the preceding sentence, any income earned (or
loss incurred) as a result of any such increase, decrease or other acquisition
or disposition referred to in clause (iii) for a period less than such
four-quarter period shall be annualized for such four-quarter period.
Maintenance of Total Unencumbered Assets. The Operating Partnership is
required to maintain Total Unencumbered Assets of not less than 150% of the
aggregate outstanding principal amount of the Unsecured Debt of the Operating
Partnership.
A breach of any of the foregoing covenants by the Operating Partnership,
and continuance of such breach for a period of 60 days after there has been
given, by registered or certified mail, to the Operating Partnership by the
Trustee or to the Operating Partnership and the Trustee by the holders of at
least 25% in principal amount of the outstanding Notes a written notice as set
forth in the Indenture, shall be an event of default under the Indenture.
As used herein:
"Annual Debt Service Charge" as of any date means the amount which is
expensed in any 12-month period for interest on Debt of the Operating
Partnership and its Subsidiaries.
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income plus amounts which have been deducted in determining
Consolidated Net Income during such period for (i) Consolidated Interest
Expense, (ii) provision for taxes of the Operating Partnership and its
Subsidiaries based on income, (iii) amortization (other than amortization of
debt discount) and depreciation, (iv) provisions for losses from sales or joint
ventures, (v) increases in deferred taxes and other non-cash items, (vi) charges
resulting from a change in accounting principles, and (vii) charges for early
extinguishment of debt, and less amounts which have been added in determining
Consolidated Net Income during such period for (a) provisions for gains from
sales or joint ventures, and (b) decreases in deferred taxes and other non-cash
items.
"Consolidated Interest Expense" means, for any period, and without
duplication, all interest (including the interest component of rentals on
capitalized leases, letter of credit fees, commitment fees and other like
financial charges) and all amortization of debt discount on all Debt (including,
without limitation, payment-in-kind, zero coupon and other like securities) of
the Operating Partnership and its Subsidiaries, but excluding legal fees, title
insurance charges and other out-of-pocket fees and expenses incurred in
connection with the issuance of Debt, all determined in accordance with
generally accepted accounting principles.
"Consolidated Net Income" for any period means the amount of consolidated
net income (or loss) of the Operating Partnership and its Subsidiaries for such
period determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Debt" of the Operating Partnership or any Subsidiary means any
indebtedness of the Operating Partnership and its Subsidiaries, whether or not
contingent, in respect of (i) borrowed money evidenced by bonds, notes,
debentures or similar instruments, (ii) indebtedness secured by any mortgage,
pledge, lien, charge, encumbrance or any security interest existing on property
owned by the Operating Partnership and its Subsidiaries, (iii) the reimbursement
obligations, contingent or otherwise, in connection with any letters of credit
actually issued or amounts representing the balance deferred and unpaid of the
purchase price of any property except any such balance that constitutes an
accrued expense or trade payable or (iv) any lease of property by the Operating
Partnership and its Subsidiaries as lessee which is reflected in the Operating
Partnership's consolidated balance sheet as a capitalized lease in accordance
with generally accepted accounting principles, in the case of items of
indebtedness under (i) through (iii) above to the extent that any such items
(other than letters of credit) would appear as a liability on the Operating
Partnership's consolidated balance sheet in accordance with generally accepted
accounting principles, and also includes, to
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the extent not otherwise included, any obligation by the Operating Partnership
or any Subsidiary to be liable for, or to pay, as obligor, guarantor or
otherwise (other than for purposes of collection in the ordinary course of
business), Debt of another person (other than the Operating Partnership or any
Subsidiary) (it being understood that Debt shall be deemed to be incurred by the
Operating Partnership and its Subsidiaries on a consolidated basis whenever the
Operating Partnership and its Subsidiaries on a consolidated basis shall create,
assume, guarantee or otherwise become liable in respect thereof) provided,
however, that the term "Debt" shall not include any such indebtedness that has
been the subject of an "in substance" defeasance in accordance with generally
accepted accounting principles.
"Secured Debt" means Debt that is secured by any mortgage, trust deed, deed
of trust, deed to secure debt, security agreement, pledge, conditional sale or
other title retention agreement, capitalized lease, or other like agreement
granting or conveying security title to or a security interest in real property
or other tangible assets.
"Senior Executive Group" shall mean, collectively, those individuals
holding the offices of Chairman of the Board, President, Chief Executive
Officer, Chief Operating Officer, or any Executive Vice President of the
Company.
"Subsidiary" means (i) any corporation or other entity the majority of the
shares of the non-voting capital stock or other equivalent ownership interests
of which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Operating Partnership or the Company, and the majority
of the shares of the voting capital stock or other equivalent ownership
interests of which (except directors' qualifying shares) are at the time
directly or indirectly owned by the Operating Partnership, the Company, any
other Subsidiary, and/or one or more individuals of the Senior Executive Group
(or, in the event of death or disability of any of such individuals, his/her
respective legal representative(s)), or such individuals' successors in office
as an officer of the Company or the Secretary of such Subsidiary, and (ii) any
other entity (other than the Company) the accounts of which are consolidated
with the accounts of the Operating Partnership.
"Total Assets" as of any date means the sum of (i) the Undepreciated Real
Estate Assets and (ii) all other assets of the Operating Partnership and its
Subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles (but excluding intangibles and accounts
receivable).
"Total Unencumbered Assets" as of any date means the sum of (i) those
Undepreciated Real Estate Assets not securing any portion of Secured Debt and
(ii) all other assets of the Operating Partnership and its Subsidiaries not
securing any portion of Secured Debt determined in accordance with generally
accepted accounting principles (but excluding accounts receivable and
intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries on such date, before depreciation and
amortization, determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Unsecured Debt" means Debt of the Operating Partnership or any Subsidiary
that is not Secured Debt.
Reference is made to the section entitled "Description of Debt
Securities -- Certain Covenants" in the accompanying Prospectus for a
description of additional covenants applicable to the Notes. Compliance with the
covenants described herein and such additional covenants with respect to the
Notes generally may not be waived by the Board of Directors of the Company, as
general partner of the Operating Partnership, or by the Trustee unless the
Holders of at least a majority in principal amount of all outstanding Notes
consent to such waiver; provided, however, that the defeasance and covenant
defeasance provisions of the Indenture described under "Description of Debt
Securities -- Discharge, Defeasance and Covenant Defeasance" in the accompanying
Prospectus will apply to the Notes, including with respect to the covenants
described in this Prospectus Supplement.
Neither the Company nor any other partner of the Operating Partnership
shall have any obligation or liability for payment of the Notes, and holders of
the Notes will have no claims or other recourse against the Company or any other
partner of the Operating Partnership, or against any assets of the Company or
any other partner of the Operating Partnership, in respect of the Notes; and the
holders of the Notes shall not have any right to enforce any obligation of a
partner to make a contribution to the Operating Partnership under any provision
of the Agreement of Limited Partnership. Neither the Company nor any other
partner of the Operating Partnership nor any of their respective assets shall be
subject to any lien, levy, execution or any
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other enforcement procedure relating directly or indirectly to the Notes or any
obligations thereunder; provided, however, that in the event of a dissolution of
the Operating Partnership, any assets of the Operating Partnership that are
received by the Company in such dissolution shall be subject to the claims of
the holders of the Notes for the enforcement of payment thereof. The Operating
Partnership covenants that the Company shall not acquire any assets other than
interests in the Operating Partnership and other than such bank accounts or
similar instruments or accounts as necessary to carry out its responsibilities
under the Agreement of Limited Partnership of the Operating Partnership without
the prior written consent of a majority in principal amount of all of the
outstanding Notes. A breach of the foregoing covenant by the Operating
Partnership, and continuance of such breach for a period of 60 days after there
has been given, by registered or certified mail, to the Operating Partnership by
the Trustee or to the Operating Partnership and the Trustee by the holders of at
least 25% in principal amount of the outstanding Notes a written notice as set
forth in the Indenture, shall be an event of default under the Indenture.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing the
applicable currency. The information set forth in this Prospectus Supplement is
directed to prospective purchasers who are United States residents and, with
respect to Foreign Currency Notes, is by necessity incomplete. The Operating
Partnership and the Agents disclaim any responsibility to advise prospective
purchasers who are residents of countries other than the United States with
respect to any matters that may affect the purchase, holding or receipt of
payments of principal of, and premium, if any, and interest, if any, on, the
Foreign Currency Notes. Such persons should consult their own financial and
legal advisors with regard to such matters.
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on Foreign Currency Notes were
commenced in a court of the United States, it is likely that such court would
grant judgment relating to such Foreign Currency Notes only in United States
dollars. It is not clear, however, whether, in granting such judgment, the rate
of conversion into United States dollars would be determined with reference to
the date of default, the date of entry of the judgment or some other date. Under
current New York law, a state court in the State of New York rendering a
judgment on a Foreign Currency Note would be required to render such judgment in
the applicable foreign currency or composite currency, and such judgment would
be converted into United States dollars at the exchange rate prevailing on the
date of entry of the judgment. Accordingly, Holders of Foreign Currency Notes
would bear the risk of exchange rate fluctuations between the time the amount of
the judgment is calculated and the time such amount is converted from United
States dollars into the applicable foreign currency or composite currency. It is
not certain, however, whether a non-New York state court would follow the same
rules and procedures with respect to conversion of foreign currency judgments.
The Operating Partnership will indemnify the Holder of any Note against any
loss incurred by such Holder as a result of any judgment or order being given or
made for any amount due under such Note and such judgment or order requiring
payment in a foreign currency or composite currency (the "Judgment Currency")
other than such foreign currency or composite currency, and as a result of any
variation between (i) the rate of exchange at which the foreign currency or
composite currency amount is converted into the Judgment Currency for the
purpose of such judgment or order, and (ii) the rate of exchange at which the
Holder of such Note, on the date of payment of such judgment or order, is able
to purchase the foreign currency or composite currency with the amount of
Judgment Currency actually received by such Holder, as the case may be.
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PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, the
Operating Partnership is obligated to make payments of principal of and premium,
if any, and interest, if any, on, Foreign Currency Notes in the applicable
Specified Currency (or, if such Specified Currency is not at the time of such
payment legal tender for the payment of public and private debts, in such other
coin or currency of the country which issued such Specified Currency as at the
time of such payment is legal tender for the payment of such debts). Any such
amounts payable by the Operating Partnership in a foreign currency or composite
currency will, unless otherwise specified in the applicable Pricing Supplement,
be converted by the Exchange Rate Agent named in the applicable Pricing
Supplement into United States dollars for payment to Holders. However, the
Holder of a Foreign Currency Note may elect to receive such amounts in the
applicable foreign currency or composite currency as hereinafter described.
Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 A.M., New York City
time, on the second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of whom may be the Exchange Rate
Agent) selected by the Exchange Rate Agent and approved by the Operating
Partnership for the purchase by the quoting dealer of the applicable foreign
currency or composite currency for United States dollars for settlement on such
payment date in the aggregate amount of such foreign currency or composite
currency payable to all Holders of Foreign Currency Notes scheduled to receive
United States dollar payments and at which the applicable dealer commits to
execute a contract. All currency exchange costs will be borne by the Holders of
such Foreign Currency Notes by deductions from such payments. If three such bid
quotations are not available, payments will be made in the applicable foreign
currency or composite currency.
A Holder of a Foreign Currency Note may elect to receive all or a specified
portion of any payment of the principal of, and premium, if any, and/or
interest, if any, on, such Foreign Currency Note in the applicable foreign
currency or composite currency by submitting a written request for such payment
to the Trustee at its corporate trust office in The City of New York on or prior
to the applicable Record Date or at least fifteen calendar days prior to the
Maturity Date, as the case may be. Such written request may be mailed or hand
delivered or sent by cable, telex or other form of facsimile transmission. A
Holder of a Foreign Currency Note may elect to receive all or a specified
portion of all future payments in the applicable foreign currency or composite
currency in respect of such principal, premium, if any, and/or interest and need
not file a separate election for each payment. Such election will remain in
effect until revoked by written notice to the Trustee, but written notice of any
such revocation must be received by the Trustee on or prior to the applicable
Record Date or at least fifteen calendar days prior to the Maturity Date, as the
case may be. Holders of Foreign Currency Notes whose Notes are to be held in the
name of a broker or nominee should contact such broker or nominee to determine
whether and how an election to receive payments in the applicable foreign
currency or composite currency may be made.
Payments of the principal of, and premium, if any, and/or interest, if any,
on, Foreign Currency Notes which are to be made in United States dollars will be
made in the manner specified herein with respect to Notes denominated in United
States dollars. See "Description of Notes -- General." Payments of interest on
Foreign Currency Notes which are to be made in the applicable foreign currency
or composite currency on an Interest Payment Date other than the Maturity Date
will be made by check mailed to the address of the Holders of such Foreign
Currency Notes as they appear in the Security Register, subject to the right to
receive such interest payments by wire transfer of immediately available funds
under certain circumstances described under "Description of Notes -- General."
Payments of principal of, and premium, if any, and/or interest, if any, on,
Foreign Currency Notes which are to be made in the applicable foreign currency
or composite currency on the Maturity Date will be made by wire transfer of
immediately available funds to an account with a bank designated at least
fifteen calendar days prior to the Maturity Date by each Holder thereof,
provided that such bank has appropriate facilities therefor and that the
applicable Foreign Currency Note is presented and surrendered at the principal
corporate trust office of the Trustee in time for the Trustee to make such
payments in such funds in accordance with its normal procedures.
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Unless otherwise specified in the applicable Pricing Supplement, a
Beneficial Owner of a Global Security or Securities representing Book-Entry
Notes payable in a currency or composite currency other than United States
dollars which elects to receive payments of principal, premium, if any, and/or
interest in such foreign currency or composite currency must notify the
Participant through which it owns its interest on or prior to the applicable
Record Date or at least fifteen calendar days prior to the Maturity Date, as the
case may be, of such Beneficial Owner's election. Such Participant must notify
the Depositary of such election on or prior to the third Business Day after such
Record Date or at least twelve calendar days prior to the Maturity Date, as the
case may be, and the Depositary will notify the Trustee of such election on or
prior to the fifth Business Day after such Record Date or at least ten calendar
days prior to the Maturity Date, as the case may be. If complete instructions
are received by the Participant from the Beneficial Owner and forwarded by the
Participant to the Depositary, and by the Depositary to the Trustee, on or prior
to such dates, then such Beneficial Owner will receive payments in the
applicable foreign currency or composite currency.
PAYMENT CURRENCY
If the applicable foreign currency for a Foreign Currency Note is not
available for the required payment of principal, premium, if any, and/or
interest, if any, in respect thereof due to the imposition of exchange controls
or other circumstances beyond the control of the Operating Partnership, the
Operating Partnership will be entitled to satisfy its obligations to the Holder
of such Foreign Currency Note by making such payment in United States dollars on
the basis of the Market Exchange Rate, as hereinafter defined, on the second
Business Day prior to such payment or, if such Market Exchange Rate is not then
available, on the basis of the most recently available Market Exchange Rate or
as otherwise specified in the applicable Pricing Supplement.
If payment in respect of a Foreign Currency Note is required to be made in
any composite currency (e.g., ECU), and such composite currency is unavailable
due to the imposition of exchange controls or other circumstances beyond the
control of the Operating Partnership, the Operating Partnership will be entitled
to satisfy its obligations to the Holder of such Foreign Currency Note by making
such payment in United States dollars. The amount of each payment in United
States dollars shall be computed by the Exchange Rate Agent on the basis of the
equivalent of the composite currency in United States dollars. The component
currencies of the composite currency for this purpose (collectively, the
"Component Currencies" and each, a "Component Currency") shall be the currency
amounts that were components of the composite currency as of the last day on
which the composite currency was used. The equivalent of the composite currency
in United States dollars shall be calculated by aggregating the United States
dollar equivalents of the Component Currencies. The United States dollar
equivalent of each of the Component Currencies shall be determined by the
Exchange Rate Agent on the basis of the Market Exchange Rate on the second
Business Day prior to the required payment or, if such Market Exchange Rate is
not then available, on the basis of the most recently available Market Exchange
Rate for each such Component Currency, or as otherwise specified in the
applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
The "Market Exchange Rate" for a currency or composite currency other than
United States dollars means the noon dollar buying rate in The City of New York
for cable transfers for such currency or composite currency as certified for
customs purposes by (or if not so certified, as otherwise determined by) the
Federal Reserve Bank of New York. Any payment made in United States dollars
under such circumstances where the required payment is in a currency or
composite currency other than United States dollars will not constitute an Event
of Default under the Indenture with respect to the Notes.
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All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of the Foreign Currency
Notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (possibly retroactively) by legislation, administrative action
or judicial decision. It deals only with Notes held as capital assets and does
not purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, tax-exempt organizations, individual
retirement and other tax deferred accounts, regulated investment companies,
dealers in securities or currencies, persons holding Notes as a hedge against
currency risks or as a position in a "straddle" for tax purposes, or persons
whose functional currency is not the United States dollar. This summary also
does not deal with holders other than original purchasers (except where
otherwise specifically noted). BECAUSE THE EXACT PRICING AND OTHER TERMS OF THE
NOTES WILL VARY, NO ASSURANCE CAN BE GIVEN THAT THE CONSIDERATIONS DESCRIBED
BELOW WILL APPLY TO A PARTICULAR ISSUANCE OF NOTES. CERTAIN MATERIAL UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF PARTICULAR
NOTES (WHERE APPLICABLE) WILL BE SUMMARIZED IN THE PRICING SUPPLEMENT RELATING
TO SUCH NOTES. PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR
OWN TAX ADVISORS CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS TO
THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE NOTES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for Federal income tax purposes (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or of any political subdivision thereof,
(iii) an estate the income of which is subject to Federal income taxation
regardless of its source, (iv) a trust if (A) a court within the United States
is able to exercise primary supervision over the administration of the trust and
(B) one or more United States persons have the authority to control all
substantial decisions of the trust, or (v) any other person whose income or gain
in respect of a Note is effectively connected with the conduct of a United
States trade or business. As used herein, the term "non-U.S. Holder" means a
beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest. Payments of interest on a Note, other than interest
on a "Discount Note" that is not "qualified stated interest" (each such term
being defined below under "Original Issue Discount"), generally will be taxable
to a U.S. Holder as ordinary interest income at the time such payments are
accrued or are received (in accordance with the U.S. Holder's regular method of
tax accounting).
Original Issue Discount. The following summary is a general discussion of
the Federal income tax consequences to U.S. Holders of the purchase, ownership
and disposition of Notes issued with original issue discount ("Discount Notes").
The following summary is based upon final Treasury regulations (the "OID
Regulations") released by the Internal Revenue Service ("IRS") on January 27,
1994, as amended on June 11, 1996, under the original issue discount provisions
of the Internal Revenue Code of 1986, as amended (the "Code").
For Federal income tax purposes, original issue discount is the excess of
the stated redemption price at maturity of a Note over its issue price, if such
excess equals or exceeds a de minimis amount. Generally, the de minimis amount
equals 1/4 of 1% of the Note's stated redemption price at maturity multiplied by
the number of complete years to its maturity from its issue date or, in the case
of an installment obligation (as defined in the OID Regulations), multiplied by
the weighted average maturity of such obligation. The issue
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price of each Note in an issue of Notes equals the first price at which a
substantial amount of such Notes has been sold to the public (ignoring sales to
bond houses, brokers, or similar persons or organizations acting in the capacity
of underwriters, placement agents, or wholesalers). The stated redemption price
at maturity of a Note is the sum of all payments provided by the Note other than
"qualified stated interest" payments. The term "qualified stated interest"
generally means stated interest that is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually at a
single fixed rate or, in certain cases, at one or more floating rates that
appropriately take into account the length of the interval between stated
interest payments. In addition, if a Note bears interest for one or more accrual
periods at a rate below the rate applicable for the remaining term of such Note
(e.g., Notes with teaser rates or interest holidays), and if the greater of
either the resulting foregone interest on such Note or any "true" discount on
such Note (i.e., the excess of the Note's stated principal amount over its issue
price) is less than a specified de minimis amount, then the stated interest on
the Note will be treated as qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note having a maturity of more than one
year from its date of issue must include original issue discount in income as
ordinary interest for United States Federal income tax purposes as it accrues
under a constant yield method in advance of receipt of the cash payments
attributable to such income, regardless of such U.S. Holder's regular method of
tax accounting. In general, the amount of original issue discount included in
income by the initial U.S. Holder of a Discount Note is the sum of the daily
portions of original issue discount with respect to such Discount Note for each
day during the taxable year (or portion of the taxable year) on which such U.S.
Holder held such Discount Note. The "daily portion" of original issue discount
on any Discount Note is determined by allocating to each day in any accrual
period a ratable portion of the original issue discount allocable to that
accrual period. An "accrual period" may be selected by each holder, may be of
any length and may vary in length over the term of the Discount Note, provided
that each accrual period is no longer than one year and each scheduled payment
of principal or interest occurs either on the final day of an accrual period or
on the first day of an accrual period. The OID Regulations contain certain rules
that generally allow any reasonable method to be used in determining the amount
of original issue discount allocable to a short initial accrual period (if all
other accrual periods are of equal length) and require that the amount of
original issue discount allocable to the final accrual period equal the excess
of the amount payable at the maturity of the Discount Note (other than any
payment of qualified stated interest) over the Discount Note's adjusted issue
price as of the beginning of such final accrual period.
The amount of original issue discount allocable to each accrual period is
generally equal to the difference between (i) the product of the Discount Note's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and appropriately adjusted to take into account the length of the
particular accrual period) and (ii) the amount of any qualified stated interest
payments allocable to such accrual period. The "adjusted issue price" of a
Discount Note at the beginning of any accrual period is the issue price of the
Discount Note, plus the amount of original issue discount allocable to all prior
accrual periods, plus the amount of any qualified stated interest on the
Discount Note that has accrued prior to the beginning of the accrual period but
is not payable until a later date, and minus the amount of any prior payments on
the Discount Note that were not qualified stated interest payments. Under these
rules, U.S. Holders generally will have to include in income increasingly
greater amounts of original issue discount in successive accrual periods than
the amounts that would be includible on a straight-line basis.
If (i) a portion of the initial purchase price of a Note is attributable to
interest that accrued prior to the Note's issue date, (ii) the first stated
interest payment on the Note is to be made within one year of the Note's issue
date and (iii) such payment will equal or exceed the amount of pre-issuance
accrued interest, then the U.S. Holder may elect to decrease the issue price of
the Note by the amount of pre-issuance accrued interest, in which case a portion
of the first stated interest payment will be treated as a return of the excluded
preissuance accrued interest and not as an amount payable on the Note.
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A U.S. Holder who purchases a Discount Note for an amount that is (i)
greater than its adjusted issue price as of the purchase date, and (ii) less
than or equal to the sum of all amounts payable on the Discount Note after the
purchase date, other than payments of qualified stated interest, will be
considered to have purchased the Discount Note at an "acquisition premium."
Under the acquisition premium rules, the amount of original issue discount which
such U.S. Holder must include in its gross income with respect to such Discount
Note for any taxable year (or portion thereof in which the U.S. Holder holds the
Discount Note) will be reduced (but not below zero) by the portion of the
acquisition premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the total
noncontingent principal payments due under the Variable Note by more than a
specified de minimis amount, and (b) it does not provide for stated interest
other than stated interest, paid or compounded at least annually, at current
values of (i) one or more qualified floating rates, (ii) a single fixed rate and
one or more qualified floating rates, (iii) a single objective rate, or (iv) a
single fixed rate and a single objective rate that is a qualified inverse
floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than 0.65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, two or more qualified floating rates that can reasonably be expected
to have approximately the same values throughout the term of the Variable Note
(e.g., two or more qualified floating rates with values within 25 basis points
of each other as determined on the Variable Note's issue date) will be treated
as a single qualified floating rate. Notwithstanding the foregoing, a variable
rate that would otherwise constitute a qualified floating rate but which is
subject to one or more restrictions such as a maximum numerical limitation
(i.e., a cap) or a minimum numerical limitation (i.e., a floor) may, under
certain circumstances, fail to be treated as a qualified floating rate unless
such cap or floor is fixed throughout the term of the Note or is not reasonably
expected to significantly affect the yield on the Variable Note.
An "objective rate" is a rate that is not itself a qualified floating rate
but which is determined using a single fixed formula and which is based upon (i)
one or more qualified floating rates, (ii) one or more rates where each rate
would be a qualified floating rate for a debt instrument denominated in a
currency other than the currency in which the Variable Note is denominated,
(iii) either the yield or changes in the price of one or more items of actively
traded personal property (other than stock or debt of the issuer or a related
party) or (iv) a combination of objective rates. The OID Regulations also
provide that other variable interest rates may be treated as objective rates if
so designated by the IRS in the future. Despite the foregoing, a variable rate
of interest on a Variable Note will not constitute an objective rate if it is
reasonably expected that the average value of such rate during the first half of
the Variable Note's term will be either significantly less than or significantly
greater than the average value of the rate during the final half of the Variable
Note's term.
A "qualified inverse floating rate" is any objective rate where such rate
is equal to a fixed rate minus a qualified floating rate, as long as variations
in the rate can reasonably be expected to inversely reflect contemporaneous
variations in the cost of newly borrowed funds. The OID Regulations also provide
that, if a Variable Note provides for stated interest at a fixed rate for an
initial period of less than one year followed by a variable rate that is either
a qualified floating rate or an objective rate, and if the variable rate on the
Variable Note's issue date is intended to approximate the fixed rate (e.g., the
value of the variable rate on the issue date does not differ from the value of
the fixed rate by more than 25 basis points), then the fixed rate and the
variable rate together will constitute either a single qualified floating rate
or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument", and if interest on
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such Note is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually, then all stated interest on such
Note will constitute qualified stated interest and will be taxed accordingly.
Thus, a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
and that qualifies as a "variable rate debt instrument" under the OID
Regulations will generally not be treated as having been issued with original
issue discount unless the Variable Note is issued at a "true" discount (i.e., at
a price below the Variable Note's stated principal amount) in excess of a
specified de minimis amount. Original issue discount on such a Variable Note
arising from "true" discount is allocated to an accrual period using the
constant yield method described above by assuming that the variable rate is a
fixed rate equal to (i) in the case of a qualified floating rate or qualified
inverse floating rate, the value as of the issue date of the qualified floating
rate or qualified inverse floating rate, or (ii) in the case of an objective
rate (other than a qualified inverse floating rate), a fixed rate that reflects
the yield that is reasonably expected for the Variable Note. The qualified
stated interest allocable to an accrual period is increased (or decreased) if
the interest actually paid during an accrual period exceeds (or is less than)
the interest assumed to be paid during the accrual period under the foregoing
rules.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated interest at a fixed rate in addition to either one or
more qualified floating rates or a qualified inverse floating rate, the fixed
rate is initially converted into a qualified floating rate (or a qualified
inverse floating rate, if the Variable Note provides for a qualified inverse
floating rate). The qualified floating rate or qualified inverse floating rate
that replaces the fixed rate must be such that the fair market value of the
Variable Note as of its issue date is approximately the same as the fair market
value of an otherwise identical debt instrument that provides for either the
qualified floating rate or qualified inverse floating rate rather than the fixed
rate. The Variable Note is then converted into an equivalent fixed rate debt
instrument in the manner described above.
Once the Variable Note is converted into an equivalent fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
equivalent fixed rate debt instrument by applying the general original issue
discount rules to the equivalent fixed rate debt instrument, and a U.S. Holder
of the Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the equivalent fixed rate debt
instrument. Each accrual period, appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the equivalent fixed rate debt instrument
in the event that such amounts differ from the actual amount of interest accrued
or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument",
then the Variable Note would be treated as a contingent payment debt obligation.
On June 11, 1996, the Treasury Department issued final regulations (the "CPDI
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt instruments. The CPDI Regulations generally require a
U.S. Holder of such an instrument to include future contingent and noncontingent
interest payments in income as such interest accrues based upon a projected
payment schedule. Moreover, in general, under the CPDI Regulations, any gain
recognized by a U.S. Holder on the sale, exchange, or retirement of a contingent
payment debt instrument will be treated as ordinary income and all or a portion
of any loss realized could be treated as ordinary loss as opposed to capital
loss (depending upon the circumstances). The proper United States Federal income
tax treatment of Variable Notes that are treated as contingent payment debt
obligations will be more fully described in the applicable Pricing Supplement.
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Certain of the Notes (i) may be redeemable at the option of the Operating
Partnership prior to their stated maturity (a "call option") and/or (ii) may be
repayable at the option of the holder prior to their stated maturity (a "put
option"). For purposes of accruing original issue discount, a call option
exercisable by the Operating Partnership or a put option exercisable by a holder
will be presumed to be exercised if, by utilizing any date on which the Note may
be redeemed or repaid as its maturity date and the amount payable on that date
in accordance with the terms of the Note (the "redemption price") as its stated
redemption price at maturity, the yield on the Note is (i) in the case of a call
option exercisable by the Operating Partnership, lower than its yield to
maturity, or, (ii) in the case of a put option exercisable by a holder, is
greater than its yield to maturity. If such an option is not in fact exercised
when presumed to be, solely for purposes of accruing original issue discount,
the Note will be treated as if it were redeemed, and a new Note issued, on the
presumed exercise date for an amount equal to its adjusted issue price on that
date. Investors intending to purchase Notes with such features should consult
their own tax advisors, since the original issue discount consequences will
depend, in part, on the particular terms and features of the purchased Notes.
U.S. Holders may elect to include in income all interest (including stated
interest, acquisition discount, original issue discount, de minimis original
issue discount, market discount, de minimis market discount, and unstated
interest, as adjusted by any amortizable bond premium or acquisition premium)
that accrues on a debt instrument by using the constant yield method applicable
to original issue discount, subject to certain limitations and exceptions. This
election applies only to the Note for which it is made and cannot be revoked
without the consent of the IRS. A U.S. Holder considering this election should
consult its own tax advisor.
Reporting of OID to Holders and to the IRS. Since the Notes will
constitute "publicly offered debt instruments" as defined by the OID
Regulations, the Operating Partnership is required to report to the IRS on Form
8281, within 30 days after the issue date, certain information relating to OID
with respect to each such issue. The Operating Partnership will report annually
to the IRS and to each Holder of record the amount of OID includable in the
gross income of a Holder of Notes for each calendar year (determined without
regard to any acquisition premium paid by any Holder), except certain exempt
Holders, including corporations.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount because none of the interest will be treated as qualified stated
interest. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless such person elects to do
so. If such an election is not made, any gain recognized by the U.S. Holder on
the sale, exchange or maturity of the Short-Term Note will be ordinary income to
the extent of the original issue discount accrued on a straight-line basis, or
upon election under the constant yield method (based on daily compounding),
through the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for Federal income tax purposes under
the accrual method, and certain other holders including banks and dealers in
securities, are required to accrue original issue discount on a Short-Term Note
on a straight-line basis unless an election is made to accrue the original issue
discount under a constant yield method (based on daily compounding). Purchasers
of Short-Term Notes are urged to consult their tax advisors before making any
election with respect to such Notes.
Market Discount. If a U.S. Holder purchases a Note at original issue,
other than a Discount Note, for an amount that is less than its issue price (or,
in the case of a subsequent purchaser, its stated redemption price at maturity)
or, in the case of a Discount Note, for an amount that is less than its adjusted
issue price as of the purchase date, such U.S. Holder will be treated as having
purchased such Note at a "market discount," unless such market discount is less
than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on a Note or any gain
realized on the sale, exchange, retirement or other disposition of a Note, as
ordinary income to the extent of the lesser of (i) the amount of such payment or
realized gain or (ii) the market discount which has not previously been included
in income and is treated as having accrued on such Note at the time of such
payment or disposition. Market discount will be considered to accrue ratably
during the period from the date
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of acquisition to the maturity date of the Note, unless the U.S. Holder elects
to accrue market discount on a constant yield basis. Once made, such an election
is irrevocable.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds the portion of market discount allocable to
the days during the taxable year in which the bond was held by the taxpayer. A
U.S. Holder may elect to include market discount in income currently as it
accrues (on either a ratable or constant yield basis), in which case the rules
described above regarding the treatment as ordinary income of gain upon the
disposition of the Note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. Generally, such
currently included market discount is treated as ordinary interest for United
States Federal income tax purposes. Such an election will apply to all debt
instruments with market discount acquired by the U.S. Holder on or after the
first day of the taxable year to which such election applies and may be revoked
only with the consent of the IRS.
Premium. If a U.S. Holder purchases a Note for an amount that is greater
than the sum of all amounts payable on the Note after the purchase date, other
than payments of qualified stated interest, such U.S. Holder will be considered
to have purchased the Note with "amortizable bond premium" equal in amount to
such excess. A U.S. Holder may elect to amortize such premium using a constant
yield method over the remaining term of the Note and may offset interest
(including original issue discount) otherwise required to be included in respect
of the Note during any taxable year by the amortized amount of such excess for
the taxable year. However, if the Note may be optionally redeemed after the U.S.
Holder acquires it at a price in excess of its stated redemption price at
maturity, special rules would apply which could result in a deferral of the
amortization of some bond premium until later in the term of the Note. Any
election to amortize bond premium applies to all taxable debt obligations then
owned and thereafter acquired by the U.S. Holder on or after the first day of
the taxable year to which such election applies, and may be revoked only with
the consent of the IRS.
Proposed Treasury regulations issued on June 27, 1996 would clarify the
treatment of bond premium. The proposed regulations describe the constant yield
method under which such premium is amortized and provide that the resulting
offset to interest income can be taken into account only as a U.S. Holder takes
the corresponding interest income into account under such U.S. Holder's regular
accounting method. In the case of instruments that may be redeemed prior to
maturity, the proposed regulations provide that the premium is calculated by
assuming that the issuer or holder will exercise or not exercise its redemption
rights in the manner that maximizes the U.S. Holder's yield. The regulations are
proposed to be effective for debt instruments acquired on or after the date 60
days after the date final regulations are published in the Federal Register.
However, if a U.S. Holder elects to amortize bond premium for the taxable year
containing such effective date, the regulations would apply to all the U.S.
Holder's debt instruments held on or after the first day of that taxable year.
It cannot be predicted at this time whether these regulations will become
effective or what, if any, modifications may be made to them prior to their
becoming effective.
Disposition of a Note. Except as discussed above, upon the sale, exchange
or retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax
basis in a Note generally will equal such U.S. Holder's initial investment in
the Note increased by any original issue discount (or acquisition discount in
the case of a Short-Term Note) included in income (and accrued market discount,
if any, if the U.S. Holder has included such market discount in income) and
decreased by the amount of any payments, other than qualified stated interest
payments, received and amortizable bond premium taken with respect to such Note.
Such gain or loss generally will be a capital gain or loss if the Note has been
held as a capital asset. In general, under the Taxpayer Relief Act of 1997, the
maximum tax rate on an individual U.S. Holder's net capital gain is reduced from
28% to 20%. However, the tax rates applicable to ordinary income continue to
apply to the sale or exchange of capital assets held for one year or less, and
the applicable tax rate under prior
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law (generally 28%) continues to apply to capital assets held for more than one
year but not more than 18 months.
Integration of Notes with Hedges. The OID Regulations generally provide
that, if a Holder of a Note hedges the Note with a financial instrument and the
combined cash flows under the Note and the financial instrument are
substantially equivalent to the cash flows on a fixed or variable rate debt
instrument, the Note and the financial instrument may be taxed as an integrated
transaction by treating the positions as a synthetic debt instrument. Such
treatment applies if the taxpayer identifies the positions as part of an
integrated transaction on its books and records and certain other requirements
are satisfied. In addition, the IRS can require the positions to be taxed as an
integrated transaction under certain circumstances. U.S. Holders should consult
their tax advisors regarding the possible application of these rules to the
Notes.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A FOREIGN
CURRENCY
The following discussion applies to U.S. Holders of Notes that are
denominated in a Foreign Currency ("Foreign Currency Notes"). As used herein,
"Foreign Currency" means a currency or currency unit other than U.S. dollars.
Payments of Interest in a Foreign Currency -- Cash Method. A U.S. Holder
who uses the cash method of accounting for United States Federal income tax
purposes and who receives a payment of interest on a Foreign Currency Note
(other than original issue discount or market discount) will be required to
include in income the U.S. dollar value of the Foreign Currency payment
(determined on the date such payment is received) regardless of whether the
payment is in fact converted to U.S. dollars at that time, and such U.S. dollar
value will be the U.S. Holder's tax basis in such Foreign Currency. No exchange
gain or loss is recognized with respect to the receipt of such payment.
Payments of Interest in a Foreign Currency -- Accrual Method. A U.S.
Holder who uses the accrual method of accounting for United States Federal
income tax purposes, or who otherwise is required to accrue interest prior to
receipt, will be required to include in income the U.S. dollar value of the
amount of interest income (including original issue discount or market discount
and reduced by amortizable bond premium to the extent applicable) that has
accrued and is otherwise required to be taken into account with respect to a
Foreign Currency Note during an accrual period. The U.S. dollar value of such
accrued income will be determined by translating such income at the average rate
of exchange for the accrual period or, with respect to an accrual period that
spans two taxable years, at the average rate for the partial period within the
taxable year. A U.S. Holder may elect, however, to translate such accrued
interest income using the rate of exchange on the last day of the accrual period
or, with respect to an accrual period that spans two taxable years, using the
rate of exchange on the last day of the taxable year. If the last day of an
accrual period is within five business days of the date of receipt of the
accrued interest, a U.S. Holder may translate such interest using the rate of
exchange on the date of receipt. The above election will apply to other debt
obligations held by the U.S. Holder and may not be changed without the consent
of the IRS. A U.S. Holder should consult a tax advisor before making the above
election. A U.S. Holder will recognize exchange gain or loss (which will be
treated as ordinary income or loss) with respect to accrued interest income on
the date such income is received. The amount of ordinary income or loss
recognized will equal the difference, if any, between the U.S. dollar value of
the Foreign Currency payment received (determined on the date such payment is
received) in respect of such accrual period and the U.S. dollar value of
interest income that has accrued during such accrual period (as determined
above).
Purchase, Sale and Retirement of Notes. A U.S. Holder who purchases a
Foreign Currency Note with previously owned Foreign Currency will recognize
ordinary income or loss in an amount equal to the difference, if any, between
such U.S. Holder's tax basis in the Foreign Currency and the U.S. dollar fair
market value of the Foreign Currency used to purchase the Foreign Currency Note,
determined on the date of purchase.
Except as discussed below with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Foreign Currency Note, a U.S. Holder will recognize
taxable gain or loss equal to the difference between the amount realized on the
sale, exchange or retirement and such U.S. Holder's adjusted tax basis in the
Foreign
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Currency Note. Such gain or loss generally will be capital gain or loss (except
to the extent of any accrued market discount not previously included in the U.S.
Holder's income). In the case of an individual investor, the tax rate applicable
to capital gains may be lower than the tax rate applicable to ordinary income,
depending (among other things) on the individual's holding period for the Notes
disposed of. See "-- U.S. Holders -- Disposition of a Note." To the extent the
amount realized represents accrued but unpaid interest, however, such amounts
must be taken into account as interest income, with exchange gain or loss
computed as described in "Payments of Interest in a Foreign Currency" above. If
a U.S. Holder receives Foreign Currency on such a sale, exchange or retirement
the amount realized will be based on the U.S. dollar value of the Foreign
Currency on the date the payment is received or the Foreign Currency Note is
disposed of (or deemed disposed of in the case of a taxable deemed exchange of
the Note for a new Note). In the case of a Foreign Currency Note that is
denominated in Foreign Currency and is traded on an established securities
market, a cash basis U.S. Holder (or, upon election, an accrual basis U.S.
Holder) will determine the U.S. dollar value of the amount realized by
translating the Foreign Currency payment at the spot rate of exchange on the
settlement date of the sale. A U.S. Holder's adjusted tax basis in a Foreign
Currency Note will equal the cost of the Note to such holder, increased by the
amounts of any market discount or original issue discount previously included in
income by the holder with respect to such Note and reduced by any amortized
acquisition or other premium and any payments received by the holder other than
payments of qualified stated interest. A U.S. Holder's tax basis in a Foreign
Currency Note, and the amount of any subsequent adjustments to such holder's tax
basis, will be the U.S. dollar value of the Foreign Currency amount paid for
such Note, or of the Foreign Currency amount of the adjustment, determined on
the date of such purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss which will not be treated as interest income or
expense. Gain or loss attributable to fluctuations in exchange rates will equal
the difference between the U.S. dollar value of the Foreign Currency principal
amount of the Note, determined on the date such payment is received or the Note
is disposed of, and the U.S. dollar value of the Foreign Currency principal
amount of the Note, determined on the date the U.S. Holder acquired the Note.
Such Foreign Currency gain or loss will be recognized only to the extent of the
total gain or loss realized by the U.S. Holder on the sale, exchange or
retirement of the Note.
Original Issue Discount. In the case of a Discount Note or Short-Term
Note, (i) original issue discount is determined in units of the Foreign
Currency, (ii) accrued original issue discount is translated into U.S. dollars
as described in "Payments of Interest in a Foreign Currency -- Accrual Method"
above and (iii) the amount of Foreign Currency gain or loss on the accrued
original issue discount is determined by comparing the amount of income received
attributable to the discount (either upon payment, maturity or an earlier
disposition), as translated into U.S. dollars at the rate of exchange on the
date of such receipt, with the amount of original issue discount accrued, as
translated above.
Premium and Market Discount. In the case of a Foreign Currency Note with
market discount, (i) market discount is determined in units of the Foreign
Currency, (ii) accrued market discount taken into account upon the receipt of
any partial principal payment or upon the sale, exchange, retirement or other
disposition of the Note (other than accrued market discount required to be taken
into account currently) is translated into U.S. dollars at the exchange rate on
such disposition date (and no part of such accrued market discount is treated as
exchange gain or loss) and (iii) accrued market discount currently includible in
income by a U.S. Holder for any accrual period is translated into U.S. dollars
on the basis of the average exchange rate in effect during such accrual period,
and the exchange gain or loss is determined upon the receipt of any partial
principal payment or upon the sale, exchange, retirement or other disposition of
the Note in the manner described in "Payments of Interest in a Foreign
Currency -- Accrual Method" above with respect to computation of exchange gain
or loss on accrued interest.
With respect to a Foreign Currency Note issued with amortizable bond
premium, such premium is determined in the relevant Foreign Currency and reduces
interest income in units of the Foreign Currency. Although not entirely clear, a
U.S. Holder should recognize exchange gain or loss equal to the difference
between the U.S. dollar value of the bond premium amortized with respect to a
period, determined on the date
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the interest attributable to such period is received, and the U.S. dollar value
of the bond premium determined on the date of the acquisition of the Note. A
U.S. Holder that elects not to amortize bond premium must treat the bond premium
as a capital loss when the Foreign Currency Note matures.
Exchange of Foreign Currencies. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement of
a Note equal to the U.S. dollar value of such Foreign Currency, determined at
the time the interest is received or at the time of the sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of Foreign Currency (including its exchange for U.S. dollars or its
use to purchase Notes) will be ordinary income or loss.
NON-U.S. HOLDERS
Subject to the discussion below under "Backup Withholding," a non-U.S.
Holder will not be subject to Federal income taxes on payments of principal,
premium (if any) or interest (including original issue discount, if any) on a
Note, unless such non-U.S. Holder is (i) a direct or indirect 10% or greater
partner (as defined in Section 871(h)(3) of the Code) of the Operating
Partnership, (ii) a controlled foreign corporation related to the Operating
Partnership or (iii) a bank receiving interest described in section 881(c)(3)(A)
of the Code. To qualify for the exemption from taxation, the last United States
payor in the chain of payment prior to payment to a non-U.S. Holder (the
"Withholding Agent") must have received in the year in which a payment of
interest or principal occurs, or in either of the two preceding calendar years,
a statement that (i) is signed by the beneficial owner of the Note under
penalties of perjury, (ii) certifies that such owner is not a U.S. Holder and
(iii) provides the name and address of the beneficial owner. The statement may
be made on an IRS Form W-8 or a substantially similar form, and the beneficial
owner must inform the Withholding Agent of any change in the information on the
statement within 30 days of such change. If a Note is held through a securities
clearing organization or certain other financial institutions, the organization
or institution may provide a signed statement to the Withholding Agent. However,
in such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution.
Recently finalized Treasury Regulations provide alternative methods for
satisfying the identification and certification requirements described in the
preceding paragraph. Generally, the Treasury Regulations are effective for
payments made after December 31, 1998, however, any certification provided on a
Form W-8 that is validly in effect prior to January 1, 1999 will be treated as a
valid certification until it expires under the Treasury Regulations or, if
earlier, until December 31, 1999. A Non-U.S. Holder should consult its tax
advisor regarding the effect of the new Treasury Regulations.
Generally, a non-U.S. Holder will not be subject to Federal income tax on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a trade
or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-US. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater partner of the Operating
Partnership or, at the time of such individual's death, payments in respect of
the Notes would have been effectively connected with the conduct by such
individual of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of Federal income tax at a rate of 31% may apply to
payments made in respect of the Notes to registered owners who are not "exempt
recipients" and who fail to provide certain identifying information (such as the
registered owner's taxpayer identification number) in the required manner.
Generally, individuals are not exempt recipients, whereas corporations and
certain other entities generally are exempt recipients. Payments made in respect
of the Notes to a U.S. Holder must be reported to the IRS, unless the U.S.
Holder is an exempt recipient or establishes an exemption. Compliance with the
identification procedures described in the preceding section would establish an
exemption from backup withholding for those non-US. Holders who are not exempt
recipients.
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In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by the Operating
Partnership to or through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Lehman Brothers Inc. and J. P. Morgan Securities Inc. (the
"Agents"). The Agents may purchase Notes, as principal, from the Operating
Partnership from time to time for resale to investors and other purchasers at
varying prices relating to prevailing market prices at the time of resale as
determined by the applicable Agent, or, if so specified in the applicable
Pricing Supplement, for resale at a fixed offering price. If agreed to by the
Operating Partnership and an Agent, such Agent may also utilize its reasonable
efforts on an agency basis to solicit offers to purchase the Notes at 100% of
the principal amount thereof, unless otherwise specified in the applicable
Pricing Supplement. The Operating Partnership will pay a commission to an Agent,
ranging from .125% to .750% of the principal amount of each Note, depending upon
its stated maturity, sold through such Agent as an agent of the Operating
Partnership. Commissions with respect to Notes with stated maturities in excess
of 30 years that are sold through an Agent will be negotiated between the
Operating Partnership and such Agent at the time of such sale.
Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a Note of
identical maturity. Each Agent may sell Notes it has purchased from the
Operating Partnership as principal to other dealers for resale to investors and
other purchasers, and may allow any portion of the discount received in
connection with such purchase from the Operating Partnership to such dealers.
After the initial offering of Notes, the offering price (in the case of Notes to
be resold on a fixed price basis), the concession and the discount may be
changed.
The Operating Partnership reserves the right to withdraw, cancel or modify
the offer made hereby without notice and may reject offers in whole or in part
(whether placed directly with the Operating Partnership or through the Agents).
Each Agent will have the right, in its discretion reasonably exercised, to
reject in whole or in part any offer to purchase Notes received by it on an
agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the Specified Currency in The City of New York on the date of
settlement. See "Description of Notes -- General."
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange. The Agents may from time to
time purchase and sell Notes in the secondary market, but the Agents are not
obligated to do so, and there can be no assurance that there will be a secondary
market for the Notes or that there will be liquidity in the secondary market if
one develops. From time to time, the Agents may make a market in the Notes, but
the Agents are not obligated to do so and may discontinue any market-making
activity at any time.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Operating
Partnership has agreed to indemnify the Agents against, and
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<PAGE> 64
to provide contribution with respect to, certain liabilities (including
liabilities under the Securities Act), or to contribute to payments the Agents
may be required to make in respect thereof. The Operating Partnership has agreed
to reimburse the Agents for certain other expenses.
In the ordinary course of their respective businesses, certain of the
Agents and their affiliates have engaged and may in the future engage in
investment and commercial banking transactions with, the Operating Partnership
and certain of its affiliates.
Concurrently with the offering of Notes described herein or from time to
time, the Operating Partnership or the Company may issue other Securities
described in the accompanying Prospectus.
LEGAL MATTERS
In addition to the legal opinions referred to under "Legal Matters" in the
accompanying Prospectus, the description of Federal income tax matters contained
in this Prospectus Supplement entitled "Certain United States Federal Income Tax
Considerations" is based upon the opinion of King & Spalding.
The legality of the Notes offered pursuant to this Prospectus Supplement
will be passed upon for the Operating Partnership by King & Spalding, Atlanta,
Georgia. Herschel M. Bloom, a member of King & Spalding, is a director of the
Company. Certain legal matters related to the Offering will be passed upon for
the Agents by Hogan & Hartson L.L.P., Washington, D.C.
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PROSPECTUS
$794,000,000
POST PROPERTIES, INC.
COMMON STOCK, PREFERRED STOCK AND DEPOSITARY SHARES
POST APARTMENT HOMES, L.P.
DEBT SECURITIES
POST LOGO
------------------------
Post Properties, Inc. (the "Company") may from time to time offer in one or
more series or classes (i) shares of its common stock, par value $0.01 per share
(the "Common Stock"), (ii) shares of its preferred stock, par value $0.01 per
share (the "Preferred Stock") and (iii) shares of Preferred Stock represented by
Depositary Shares (the "Depositary Shares"), with an aggregate public offering
price of up to $450,000,000 (or its equivalent in another currency based on the
exchange rate at the time of sale) in amounts, at prices and on terms to be
determined at the time of offering. Post Apartment Homes, L.P. (the "Operating
Partnership") may from time to time offer in one or more series unsecured non-
convertible debt securities ("Debt Securities"), with an aggregate public
offering price of up to $344,000,000 (or its equivalent in another currency
based on the exchange rate at the time of sale) in amounts, at prices and on
terms to be determined at the time of offering. The Common Stock, Preferred
Stock, Depositary Shares and Debt Securities (collectively, the "Securities")
may be offered, separately or together, in separate series in amounts, at prices
and on terms to be set forth in one or more supplements to this Prospectus
(each, a "Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable (i) in the case of Common Stock, any initial
public offering price; (ii) in the case of Preferred Stock, the specific title
and stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; (iii) in the case of
Depositary Shares, the fractional share of Preferred Stock represented by each
such Depositary Share; and (iv) in the case of Debt Securities, the specific
title, aggregate principal amount, currency, form (which may be registered or
bearer, or certificated or global), authorized denominations, maturity, rate (or
manner of calculation thereof) and time of payment of interest, terms for
redemption at the option of the Operating Partnership or repayment at the option
of the holder, terms for sinking fund payments, covenants and any initial public
offering price. In addition, such specific terms may include limitations on
direct or beneficial ownership and restrictions on transfer of the Securities,
in each case as may be appropriate to preserve the status of the Company as a
real estate investment trust ("REIT") for Federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States Federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Securities may be offered directly, through agents designated from time
to time by the Company or the Operating Partnership, or to or through
underwriters or dealers. If any agents or underwriters are involved in the sale
of any of the Securities, their names, and any applicable purchase price, fee,
commission or discount arrangement between or among them, will be set forth, or
will be calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Securities may be sold without
delivery of the applicable Prospectus Supplement describing the method and terms
of the offering of such series of Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
The date of this Prospectus is October 20, 1997.
<PAGE> 66
AVAILABLE INFORMATION
The Company and the Operating Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by the Company and the
Operating Partnership may be examined without charge at, or copies obtained upon
payment of prescribed fees from, the Public Reference Section of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and are also
available for inspection and copying at the regional offices of the Commission
located at Seven World Trade Center, New York, New York 10048 and at 500 West
Madison Street, Chicago, Illinois 60661-2511. In addition, the Company's Common
Stock is listed on the New York Stock Exchange and such material can also be
inspected and copied at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005. Copies of documents electronically filed
with the Commission also may be obtained at the Commission's Internet address at
"http://www.sec.gov".
The Company and the Operating Partnership have filed with the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), and the
rules and regulations promulgated thereunder, with respect to the Securities.
This Prospectus, which is part of the Registration Statement, does not contain
all of the information set forth in the Registration Statement and the exhibits
and financial schedules thereto. For further information concerning the Company,
the Operating Partnership and the Securities, reference is made to the
Registration Statement and the exhibits and schedules filed therewith, which may
be examined without charge at, or copies obtained upon payment of prescribed
fees from, the Commission and its regional offices at the locations listed
above. Any statements contained herein concerning the provisions of any document
are not necessarily complete, and, in each instance, reference is made to the
copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company (File No. 1-12080)
and the Operating Partnership (File No. 0-28226) with the Commission are
incorporated herein by reference: (a) the Company's Annual Report on Form 10-K
for the year ended December 31, 1996; (b) the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997; (c) the
Company's Current Reports on Form 8-K filed on February 27, 1997, August 6, 1997
and September 17, 1997; (d) the description of the Common Stock of the Company
included in the Company's Registration Statement on Form 8-A, dated July 22,
1993; (e) the Operating Partnership's Annual Report on Form 10-K for the year
ended December 31, 1996; (f) the Operating Partnership's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997; and (g) the
Operating Partnership's Current Reports on Form 8-K filed on January 29, 1997,
February 27, 1997, August 6, 1997 and September 17, 1997.
All documents filed by the Company and/or the Operating Partnership
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the Offering shall
be deemed to be incorporated by reference in this Prospectus and made a part
hereof from the date of the filing of such documents. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other document subsequently
filed with the Commission which also is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company and the Operating Partnership will provide without charge to
each person, including any beneficial owner, to whom this Prospectus is
delivered, upon the written or oral request of such person, a copy of any or all
of the documents incorporated by reference herein (not including the exhibits to
such documents, unless such exhibits are specifically incorporated by reference
in such documents). Request for such copies should be directed to: Post
Properties, Inc., 3350 Cumberland Circle, Suite 2200, Atlanta, Georgia 30339,
Attention: Secretary, telephone (770) 850-4400.
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<PAGE> 67
THE COMPANY AND THE OPERATING PARTNERSHIP
The Company is a self-administered and self-managed equity real estate
investment trust (a "REIT") and is one of the largest developers and operators
of upscale multifamily apartment communities in the Southeastern United States.
As of June 30, 1997, the Company owned 49 stabilized communities (the
"Communities") containing 17,648 apartment units located primarily in
metropolitan Atlanta, Georgia and Tampa, Florida. In addition, as of June 30,
1997, the Company had under construction or in initial lease-up ten new
communities and additions to two existing communities in the Atlanta, Georgia;
Tampa, Florida; Nashville, Tennessee and Charlotte, North Carolina metropolitan
areas that will contain an aggregate of 4,025 apartment units when completed.
For the six months ended June 30, 1997, the average economic occupancy rate of
the 48 Communities stabilized for the entire period was 94.3%. The average
monthly rental rate per apartment unit at these Communities for the same period
was $800. The Company also manages through affiliates one community with 260
apartment units under the Post(R) brand name for third parties and approximately
7,800 additional apartment units owned by third parties. The Company is a
fully-integrated organization with multifamily development, acquisition,
operation and asset management expertise and has approximately 1,200 employees,
none of whom is a party to a collective bargaining agreement.
The Company is the sole general partner of, and controls a majority of the
limited partnership interests in, the Operating Partnership. As of June 30,
1997, the Company owned 80.9% of the outstanding partnership interests in the
Operating Partnership. The Company conducts all its business through the
Operating Partnership and its subsidiaries.
As of June 30, 1997 the Company and the Operating Partnership had
outstanding indebtedness of $473.7 million. Any applicable Prospectus Supplement
relating to offered securities will set forth the outstanding indebtedness of
the issuer and its subsidiaries as of a recent date.
On August 4, 1997, the Company announced that it has entered into a
definitive agreement and plan of merger with Columbus Realty Trust, a Texas real
estate investment trust ("Columbus"), pursuant to which Columbus would be merged
into a wholly owned subsidiary of the Company (the "Merger Agreement"). Pursuant
to the Merger Agreement, each outstanding share of Columbus common shares will
be converted into 0.615 shares of Common Stock, which will result in the
issuance of approximately 8.4 million shares of Common Stock. Upon completion of
the merger, the Company will own 85.4% of the outstanding partnership interests
in the Operating Partnership. The merger, which will be accounted for as a
purchase, is expected to be completed in October 1997, subject to the approval
of the shareholders of the Company and Columbus and other customary conditions.
Columbus is a self-administered and self-managed REIT which develops, owns and
operates upscale multifamily residential properties primarily in urban
communities in the Southwestern United States. As of June 30, 1997, Columbus
owned 39 total properties: 28 completed multifamily residential properties
containing an aggregate of 6,045 apartment units located primarily in the
Dallas/Ft. Worth metropolitan area, two industrial properties, one retail
property, six multifamily development sites in various stages of construction,
and two sites acquired for future development.
The Company is a Georgia corporation that was founded in 1971. The
Operating Partnership is a Georgia limited partnership that was formed in 1993.
The Company's and the Operating Partnership's executive offices are located at
3350 Cumberland Circle, Suite 2200, Atlanta, Georgia 30339 and their telephone
number is (770) 850-4400.
USE OF PROCEEDS
The Company is required, by the terms of the partnership agreement of the
Operating Partnership, to invest the net proceeds of any sale of Common Stock,
Preferred Stock or Depositary Shares in the Operating Partnership in exchange
for additional Units. Unless otherwise indicated in the applicable Prospectus
Supplement, the Company and the Operating Partnership intend to use such net
proceeds and the net proceeds from the sale of Debt Securities for general
corporate purposes including, without limitation, the acquisition and
development of multi-family communities and the repayment of debt. Pending
application of the net proceeds, the Operating Partnership will invest such
proceeds in interest-bearing accounts and short-term, interest-bearing
securities, which are consistent with the Company's intention to continue to
qualify for taxation as a REIT. Such investments may include, for example,
obligations of the Government National
3
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Mortgage Association, other government and government agency securities,
certificates of deposit, interest-bearing bank deposits and mortgage loan
participations.
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The Company's and the Operating Partnership's ratios of earnings to fixed
charges were 2.8 for the six months ended June 30, 1997, 2.7 for the year ended
December 31, 1996, 2.1 for the year ended December 31, 1995, 2.0 for the year
ended December 31, 1994 and 1.1 for the year ended December 31, 1993.
For purposes of calculating the ratios of earnings to fixed charges,
earnings have been calculated by adding fixed charges, excluding capitalized
interest, and minority interest to pre-tax income from continuing operations.
Fixed charges consist of interest costs, whether expensed or capitalized, the
interest component of rental expense and amortization of debt issuance costs.
The Company's and the Operating Partnership's ratios of earnings to
combined fixed charges and preferred stock dividends were 2.6 for the six months
ended June 30, 1997, 2.6 for the year ended December 31, 1996, 2.1 for the year
ended December 31, 1995, 2.0 for the year ended December 31, 1994 and 1.1 for
the year ended December 31, 1993.
For purposes of calculating the ratios of earnings to combined fixed
charges and preferred stock dividends, earnings have been calculated by adding
combined fixed charges and preferred stock dividends, excluding capitalized
interest, and minority interest to pre-tax income from continuing operations.
Combined fixed charges and preferred stock dividends consist of interest costs,
whether expensed or capitalized, the interest component of rental expense,
amortization of debt issuance costs and preferred dividends.
Prior to completion of the Company's reorganization in July 1993, the
Company maintained a different capital structure. As a result, although the
original properties have historically generated positive net cash flow, the
financial statements of the Company show a net loss for the fiscal year ended
December 31, 1992. Consequently, the computation of the ratios of earnings to
fixed charges and ratios of earnings to combined fixed charges and preferred
stock dividends for such period indicates that the earnings were inadequate to
cover fixed charges and combined fixed charges and preferred stock dividends by
approximately $10.0 million.
The recapitalization of the Company effected in connection with the
reorganization permitted the Company to significantly deleverage, resulting in
an improved ratio of earnings to fixed charges for periods subsequent to the
reorganization.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture (the "Indenture"),
between the Operating Partnership and a Trustee (the "Trustee") chosen by the
Operating Partnership and qualified to act as Trustee under the Trust Indenture
Act of 1939, as amended (the "TIA"). The Indenture has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part and will be
available for inspection at the corporate trust office of the trustee or as
described above under "Available Information." The Indenture is subject to, and
governed by, the TIA. The statements made hereunder relating to the Indenture
and the Debt Securities to be issued thereunder are summaries of all material
provisions thereof and do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all provisions of the Indenture and
such Debt Securities. All section references appearing herein are to sections of
the Indenture.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Operating
Partnership and will rank equally with all other unsecured and unsubordinated
indebtedness of the Operating Partnership. At June 30, 1997, the total
outstanding debt of the Operating Partnership was $473.7 million, all of which
was unsubordinated indebtedness. Of such outstanding debt, $165.7 million was
secured debt. The Debt Securities may be issued without limit as to aggregate
principal amount, in one or more series, in each case as established from time
to time in or pursuant to authority granted by a resolution of the Board of
Directors of the Company
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as sole general partner of the Operating Partnership or as established in one or
more indentures supplemental to the Indenture. All Debt Securities of one series
need not be issued at the same time and, unless otherwise provided, a series may
be reopened, without the consent of the holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series (Section
301).
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series (Section 608). In the event that two or more persons are acting as
Trustee with respect to different series of Debt Securities, each such Trustee
shall be a trustee of a trust under the Indenture separate and apart from the
trust administered by any other Trustee (Section 609), and, except as otherwise
indicated herein, any action described herein to be taken by a Trustee may be
taken by each such Trustee with respect to, and only with respect to, the one or
more series of Debt Securities for which it is Trustee under the Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities offered thereby for the specific terms thereof, including:
(1) the title of such Debt Securities;
(2) any limit on the aggregate principal amount of such Debt
Securities that may be authenticated and delivered under the Indenture;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof;
(4) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be payable;
(5) the rate or rates, or the method by which such rate or rates shall
be determined, at which such Debt Securities will bear interest, if any,
the date or dates, or the method for determining such date or dates, from
which any interest will accrue, the dates on which any such interest will
be payable, the record dates for such interest payment dates, or the method
by which any such date shall be determined, and the basis upon which
interest shall be calculated if other than that of a 360-day year of twelve
30-day months;
(6) the place or places where the principal of (and premium, if any),
interest, if any, and additional amounts, if any, on such Debt Securities
will be payable, such Debt Securities may be surrendered for registration
of transfer or exchange and notices or demands to or upon the Operating
Partnership in respect of such Debt Securities and the Indenture may be
served;
(7) the period or periods within which, the price or prices at which,
the currency or currencies, currency unit or units or composite currency or
currencies in which, and the terms and conditions upon which such Debt
Securities may be redeemed, as a whole or in part, at the option of the
Operating Partnership, if the Operating Partnership is to have such an
option;
(8) the obligation, if any, of the Operating Partnership to redeem,
repay or purchase such Debt Securities pursuant to any sinking fund or
analogous provision or at the option of a holder thereof, and the period or
periods within which, the price or prices at which, the currency or
currencies, currency unit or units or composite currency or currencies in
which, and the terms and conditions upon which such Debt Securities will be
redeemed, repaid or purchased, as a whole or in part, pursuant to such
obligation;
(9) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which any registered Debt Securities
("Registered Securities") shall be issuable and, if other than
denominations of $5,000 and any integral multiple thereof, the denomination
or denominations in which any bearer Debt Securities ("Bearer Securities")
shall be issuable;
(10) if other than the Trustee, the identity of each security
registrar and/or paying agent;
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(11) if other than the principal amount thereof, the portion of the
principal amount of the Debt Securities that shall be payable upon
declaration of acceleration of the maturity thereof or the method by which
such portion shall be determined;
(12) if other than U.S. dollars, the currency or currencies in which
payment of the principal of (and premium, if any) or interest or additional
amounts, if any, on the Debt Securities shall be payable or in which the
Debt Securities shall be denominated;
(13) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on the Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may be based, without limitation, on one or more currencies,
currency units, composite currencies, commodities, equity indices or other
indices), and the manner in which such amounts shall be determined;
(14) whether the principal of (and premium, if any) or interest or
additional amounts, if any, on the Debt Securities are to be payable, at
the election of the Operating Partnership or a holder (a "Holder") thereof,
in a currency or currencies, currency unit or units or composite currency
or currencies other than that in which such Debt Securities are denominated
or stated to be payable, the period or periods within which, and the terms
and conditions upon which, such election may be made, and the time and
manner of, and identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies, currency
unit or units or composite currency or currencies in which such Debt
Securities are denominated or stated to be payable and the currency or
currencies, currency unit or units or composite currency or currencies in
which such Debt Securities are to be so payable;
(15) provisions, if any, granting special rights to the Holders of the
Debt Securities upon the occurrence of such events as may be specified;
(16) any deletions from, modifications of or additions to the events
of default (the "Events of Default") or covenants of the Operating
Partnership with respect to the Debt Securities, whether or not such Events
of Default or covenants are consistent with the Events of Default or
covenants set forth in the Indenture;
(17) whether the Debt Securities are to be issuable as Registered
Securities, Bearer Securities (with or without coupons) or both, any
restrictions applicable to the offer, sale or delivery of Bearer Securities
and the terms upon which Bearer Securities may be exchanged for Registered
Securities and vice versa (if permitted by applicable laws and
regulations), whether any Debt Securities are to be issuable initially in
temporary global form and whether any Debt Securities are to be issuable in
permanent global form with or without coupons and, if so, whether
beneficial owners of interests in any such permanent global Debt Security
may exchange such interests for Debt Securities of such series and of like
tenor of any authorized form and denomination and the circumstances under
which any such exchanges may occur, and, if Registered Securities are to be
issuable as a global Debt Security, the identity of the depositary for such
series;
(18) the date as of which any Bearer Securities and any temporary
global Debt Security representing Outstanding (as hereinafter defined) Debt
Securities shall be dated if other than the date of original issuance of
the first Debt Security of the series to be issued;
(19) the person to whom any interest on any Registered Security shall
be payable, if other than the person in whose name that Debt Security is
registered at the close of business on the applicable record date (the
"Regular Record Date") for such interest, the manner in which, or the
person to whom any interest on any Bearer Security shall be payable, if
otherwise than upon presentation and surrender of the coupons appertaining
thereto as they severally mature, and the extent to which, or the manner in
which, any interest payable on a temporary global Debt Security on an
interest payment date (an "Interest Payment Date") will be paid;
(20) if the defeasance and covenant defeasance provisions described
herein are to be inapplicable or any modification of such provisions;
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(21) if the Debt Securities to be issuable in definitive form (whether
upon original issue or upon exchange of a temporary Debt Security) only
upon receipt of certain certificates or other documents or satisfaction of
other conditions, then the form and/or terms of such certificates,
documents or conditions;
(22) whether and under what circumstances the Operating Partnership
will pay additional amounts on the Debt Securities to any Holder who is not
a United States person (including any modification to the definition of
such term) in respect of any tax, assessment or governmental charge and, if
so, whether the Operating Partnership will have the option to redeem such
Debt Securities rather than pay such additional amounts (and the terms of
any such option);
(23) with respect to any Debt Securities that provide for optional
redemption or prepayment upon the occurrence of certain events (such as a
change of control of the Operating Partnership), (i) the possible effects
of such provisions on the market price of the Operating Partnership's or
the Company's securities or in deterring certain mergers, tender offers or
other takeover attempts, and the intention of the Operating Partnership to
comply with the requirements of Rule 14e-1 under the Exchange Act and any
other applicable securities laws in connection with such provisions; (ii)
whether the occurrence of the specified events may give rise to
cross-defaults on other indebtedness such that payment on such Debt
Securities may be effectively subordinated; and (iii) the existence of any
limitations on the Operating Partnership's financial or legal ability to
repurchase such Debt Securities upon the occurrence of such an event
(including, if true, the lack of assurance that such a repurchase can be
effected) and the impact, if any, under the Indenture of such a failure,
including whether and under what circumstances such a failure may
constitute an Event of Default; and
(24) any other terms of such Debt Securities not inconsistent with the
terms of the Indenture.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). If material or applicable, special U.S.
Federal income tax, accounting and other considerations applicable to Original
Issue Discount Securities will be described in the applicable Prospectus
Supplement.
Except as described under "Merger, Consolidation or Sale" or as may be set
forth in any Prospectus Supplement, the Indenture does not contain any other
provisions that would limit the ability of the Operating Partnership to incur
indebtedness or that would afford holders of the Debt Securities protection in
the event of (i) a highly leveraged or similar transaction involving the
Operating Partnership, the management of the Operating Partnership or the
Company, or any affiliate of any such party, (ii) a change of control, or (iii)
a reorganization, restructuring, merger or similar transaction involving the
Operating Partnership that may adversely affect the holders of the Debt
Securities. In addition, subject to the limitations set forth under "Merger,
Consolidation or Sale," the Operating Partnership may, in the future, enter into
certain transactions, such as the sale of all or substantially all of its assets
or the merger or consolidation of the Operating Partnership, that would increase
the amount of the Operating Partnership's indebtedness or substantially reduce
or eliminate the Operating Partnership's assets, which may have an adverse
effect on the Operating Partnership's ability to service its indebtedness,
including the Debt Securities. In addition, restrictions on ownership and
transfers of the Company's Common Stock and Preferred Stock are designed to
preserve its status as a REIT and, therefore, may act to prevent or hinder a
change of control. See "Description of Common Stock -- Restrictions on Transfer"
and "Description of Preferred Stock -- Restrictions on Ownership." Reference is
made to the applicable Prospectus Supplement for information with respect to any
deletions from, modifications of or additions to the events of default or
covenants that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
The applicable Prospectus Supplement will summarize the nature and scope of
any event risk provisions contained in any offered Debt Security, including the
types of events protected by such provisions and any limitations on the
Operating Partnership's ability to satisfy its obligations under such
provisions. The applicable Prospectus Supplement will also summarize
anti-takeover provisions in other securities of the Operating Partnership or the
Company, which could have a material effect on the offered Debt Securities. Such
summary will contain a detailed and quantifiable definition of any "change in
control" provision.
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Reference is made to "-- Certain Covenants" below and to the description of
any additional covenants with respect to a series of Debt Securities in the
applicable Prospectus Supplement. Except as otherwise described in the
applicable Prospectus Supplement, compliance with such covenants generally may
not be waived with respect to a series of Debt Securities by the Board of
Directors of the Company as sole general partner of the Operating Partnership or
by the Trustee unless the Holders of at least a majority in principal amount of
all outstanding Debt Securities of such series consent to such waiver, except to
the extent that the defeasance and covenant defeasance provisions of the
Indenture described under "-- Discharge, Defeasance and Covenant Defeasance"
below apply to such series of Debt Securities. See "-- Modification of the
Indenture."
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series which are Registered Securities, other than
Registered Securities issued in global form (which may be of any denomination),
shall be issuable in denominations of $1,000 and any integral multiple thereof
and the Debt Securities which are Bearer Securities, other than Bearer
Securities issued in global form (which may be of any denomination), shall be
issuable in denominations of $5,000 (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at the corporate trust office of the Trustee, provided that, at
the option of the Operating Partnership, payment of interest may be made by
check mailed to the address of the Person entitled thereto as it appears in the
applicable Security Register or by wire transfer of funds to such Person at an
account maintained within the United States (Sections 301, 307 and 1002).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the Regular Record Date and may
either be paid to the Person in whose name such Debt Security is registered at
the close of business on a special record date (the "Special Record Date") for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to the Holder of such Debt Security not less than 10 days
prior to such Special Record Date, or may be paid at any time in any other
lawful manner, all as more completely described in the Indenture.
Subject to certain limitations imposed upon Debt Securities issued in book
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount and
tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the Trustee. In addition, subject to
certain limitations imposed upon Debt Securities issued in book entry form, the
Debt Securities of any series may be surrendered for registration of transfer
thereof at the corporate trust office of the Trustee. Every Debt Security
surrendered for registration of transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer. No service charge will be made
for any registration of transfer or exchange of any Debt Securities, but the
Trustee or the Operating Partnership may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith
(Section 305). If the applicable Prospectus Supplement refers to any transfer
agent (in addition to the Trustee) initially designated by the Operating
Partnership with respect to any series of Debt Securities, the Operating
Partnership may at any time rescind the designation of any such transfer agent
or approve a change in the location through which any such transfer agent acts,
except that the Operating Partnership will be required to maintain a transfer
agent in each place of payment for such series. The Operating Partnership may at
any time designate additional transfer agents with respect to any series of Debt
Securities (Section 1002).
Neither the Operating Partnership nor the Trustee shall be required (i) to
issue, register the transfer of or exchange any Debt Security if such Debt
Security may be among those selected for redemption during a period beginning at
the opening of business 15 days before selection of the Debt Securities to be
redeemed and ending at the close of business on (A) if such Debt Securities are
issuable only as Registered Securities, the day of the mailing of the relevant
notice of redemption and (B) if such Debt Securities are issuable as Bearer
Securities, the day of the first publication of the relevant notice of
redemption or, if such Debt Securities are
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also issuable as Registered Securities and there is no publication, the mailing
of the relevant notice of redemption, or (ii) to register the transfer of or
exchange any Registered Security so selected for redemption in whole or in part,
except, in the case of any Registered Security to be redeemed in part, the
portion thereof not to be redeemed, or (iii) to exchange any Bearer Security so
selected for redemption except that such a Bearer Security may be exchanged for
a Registered Security of that series and like tenor, provided that such
Registered Security shall be simultaneously surrendered for redemption, or (iv)
to issue, register the transfer of or exchange any Debt Security which has been
surrendered for repayment at the option of the Holder, except the portion, if
any, of such Debt Security not to be so repaid (Section 305).
MERGER, CONSOLIDATION OR SALE
The Operating Partnership may consolidate with, or sell, lease or convey
all or substantially all of its assets to, or merge with or into, any other
entity, provided that (a) the Operating Partnership shall be the continuing
entity, or the successor entity (if other than the Operating Partnership) formed
by or resulting from any such consolidation or merger or which shall have
received the transfer of such assets shall expressly assume payment of the
principal of (and premium, if any) and interest on all the Debt Securities and
the due and punctual performance and observance of all of the covenants and
conditions contained in the Indenture; (b) immediately after giving effect to
such transaction and treating any indebtedness which becomes an obligation of
the Operating Partnership or any subsidiary of the Operating Partnership (a
"Subsidiary") as a result thereof as having been incurred by the Operating
Partnership or such Subsidiary at the time of such transaction, no Event of
Default under the Indenture, and no event which, after notice or the lapse of
time, or both, would become such an Event of Default, shall have occurred and be
continuing; and (c) an officer's certificate and legal opinion covering such
conditions shall be delivered to the Trustee (Sections 801 and 803).
CERTAIN COVENANTS
Existence. Except as permitted under "Merger, Consolidation or Sale," the
Operating Partnership is required to do or cause to be done all things necessary
to preserve and keep in full force and effect its existence, rights and
franchises; provided, however, that the Operating Partnership shall not be
required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of its business and
that the loss thereof is not disadvantageous in any material respect to the
Holders of the Debt Securities (Section 1006).
Maintenance of Properties. The Operating Partnership is required to cause
all of its material properties used or useful in the conduct of its business or
the business of any Subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and to cause
to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Operating Partnership may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that the
Operating Partnership and its Subsidiaries shall not be prevented from selling
or otherwise disposing for value their respective properties in the ordinary
course of business (Section 1007).
Insurance. The Operating Partnership is required to, and is required to
cause each of its Subsidiaries to, keep all of its insurable properties insured
against loss or damage at least equal to their then full insurable value with
financially sound and reputable insurance companies (Section 1008).
Payment of Taxes and Other Claims. The Operating Partnership is required
to pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon its income, profits or property or
that of any Subsidiary, and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Operating Partnership or any Subsidiary; provided, however, that the Operating
Partnership shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings (Section
1009).
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Provision of Financial Information. The Holders of Debt Securities will be
provided with copies of the annual reports and quarterly reports of the
Operating Partnership. Whether or not the Operating Partnership is subject to
Section 13 or 15(d) of the Exchange Act and for so long as any Debt Securities
are outstanding, the Operating Partnership will, to the extent permitted under
the Exchange Act, be required to file with the Commission the annual reports,
quarterly reports and other documents which the Operating Partnership would have
been required to file with the Commission pursuant to such Section 13 or 15(d)
(the "Financial Statements") if the Operating Partnership were so subject, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Operating Partnership would have been
required so to file such documents if the Operating Partnership were so subject.
The Operating Partnership will also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders of Debt Securities, as
their names and addresses appear in the security register for the Debt
Securities (the "Security Register"), without cost to such Holders, copies of
the annual reports and quarterly reports which the Operating Partnership would
have been required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act if the Operating Partnership were subject to such Sections
and (ii) file with the Trustee copies of the annual reports, quarterly reports
and other documents which the Operating Partnership would have been required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act if
the Operating Partnership were subject to such Sections and (y) if filing such
documents by the Operating Partnership with the Commission is not permitted
under the Exchange Act, promptly upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of such documents to
any prospective Holder (Section 1010).
Additional Covenants. Any additional or different covenants of the
Operating Partnership with respect to any series of Debt Securities will be set
forth in the Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default for
30 days in the payment of any installment of interest on any Debt Security of
such series; (b) default in the payment of the principal of (or premium, if any,
on) any Debt Security of such series at its maturity; (c) default in making any
sinking fund payment as required for any Debt Security of such series; (d)
default in the performance of any other covenant of the Operating Partnership
contained in the Indenture (other than a covenant added to the Indenture solely
for the benefit of a series of Debt Securities issued thereunder other than such
series), such default having continued for 60 days after written notice as
provided in the Indenture; (e) default in the payment of an aggregate principal
amount exceeding $5,000,000 of any evidence of recourse indebtedness of the
Operating Partnership or any mortgage, indenture or other instrument under which
such indebtedness is issued or by which such indebtedness is secured, such
default having occurred after the expiration of any applicable grace period and
having resulted in the acceleration of the maturity of such indebtedness, but
only if such indebtedness is not discharged or such acceleration is not
rescinded or annulled; (f) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of the
Operating Partnership or any Significant Subsidiary or any of their respective
property; and (g) any other Event of Default provided with respect to a
particular series of Debt Securities. The term "Significant Subsidiary" means
each significant subsidiary (as defined in Regulation S-X promulgated under the
Securities Act) of the Operating Partnership.
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time Outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Debt Securities of that series may declare the principal amount
(or, if the Debt Securities of that series are Original Issue Discount
Securities or Securities, the terms of which provide that the principal amount
thereof payable at maturity may be more or less than the principal face amount
thereof at original issuance ("Indexed Securities"), such portion of the
principal amount as may be specified in the terms thereof) of all of the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Operating Partnership (and to the Trustee if given by the
Holders). However, at any time after such a declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
Outstanding under the Indenture, as the case may be) has been made, but before a
judgment
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or decree for payment of the money due has been obtained by the Trustee, the
Holders of not less than a majority in principal amount of Outstanding Debt
Securities of such series (or of all Debt Securities then Outstanding under the
Indenture, as the case may be) may rescind and annul such declaration and its
consequences if (a) the Operating Partnership shall have deposited with the
applicable Trustee all required payments of the principal of (and premium, if
any) and interest on the Debt Securities of such series (or of all Debt
Securities then Outstanding under the Indenture, as the case may be), plus
certain fees, expenses, disbursements and advances of the Trustee and (b) all
Events of Default, other than the nonpayment of accelerated principal of (or
specified portion thereof), or premium (if any) or interest on the Debt
Securities of such series (or of all Debt Securities then Outstanding under the
Indenture, as the case may be) have been cured or waived as provided in the
Indenture (Section 502). The Indenture also provides that the Holders of not
less than a majority in principal amount of the Outstanding Debt Securities of
any series (or of all Debt Securities then Outstanding under the Indenture, as
the case may be) may waive any past default with respect to such series and its
consequences, except a default (x) in the payment of the principal of (or
premium, if any) or interest on any Debt Security or such series or (y) in
respect of a covenant or provision contained in the Indenture that cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security affected thereby (Section 513).
The Trustee will be required to give notice to the Holders of Debt
Securities within 90 days of a default under the Indenture unless such default
has been cured or waived; provided, however, that the Trustee may withhold
notice to the Holders of any series of Debt Securities of any default with
respect to such series (except a default in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of such
series) if specified Responsible Officers of the Trustee consider such
withholding to be in the interest of such Holders (Section 601).
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of such series, as well as
an offer of indemnity reasonably satisfactory to it (Section 507). This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof (Section 508).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under the Indenture, unless such
Holders shall have offered to the Trustee thereunder reasonable security or
indemnity (Section 602). The Holders of not less than a majority in principal
amount of the Outstanding Debt securities of any series (or of all Debt
Securities then Outstanding under the Indenture, as the case may be) shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or of exercising any trust or power
conferred upon the Trustee. However, the Trustee may refuse to follow any
direction which is in conflict with any law or the Indenture, which may involve
the Trustee in personal liability or which may be unduly prejudicial to the
holders of Debt Securities of such series not joining therein (Section 512).
Within 120 days after the close of each fiscal year, the Operating
Partnership must deliver to the Trustee a certificate, signed by one of several
specified officers of the Company, stating whether or not such officer has
knowledge of any default under the Indenture and, if so, specifying each such
default and the nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture will be permitted to be made
only with the consent of the Holders of not less than a majority in principal
amount of all Outstanding Debt Securities or series of Outstanding Debt
Securities which are affected by such modification or amendment; provided,
however, that no such modification or amendment may, without the consent of the
Holders of each such Debt Security
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affected thereby, (a) change the Stated Maturity of the principal of, or premium
(if any) or any installment of interest on, any such Debt Security; (b) reduce
the principal amount of, or the rate or amount of interest on, or any premium
payable on redemption of, any such Debt Security, or reduce the amount of
principal of an Original Issue Discount Security that would be due and payable
upon declaration of acceleration of the maturity thereof or would be provable in
bankruptcy, or adversely affect any right of repayment of the holder of any such
Debt Security; (c) change the place of payment, or the coin or currency, for
payment of principal of, premium, if any, or interest on any such Debt Security;
(d) impair the right to institute suit for the enforcement of any payment on or
with respect to any such Debt Security; (e) reduce the above stated percentage
of outstanding Debt Securities of any series necessary to modify or amend the
Indenture, to waive compliance with certain provisions thereof or certain
defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture; or (f) modify any of the foregoing
provisions or any of the provisions relating to the waiver of certain past
defaults or certain covenants, except to increase the required percentage to
effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holders of such Debt Security
(Section 902). A Debt Security shall be deemed outstanding ("Outstanding") if it
has been authenticated and delivered under the Indenture unless, among other
things, such Debt Security has been cancelled or redeemed.
The Indenture provides that the Holders of not less than a majority in
principal amount of a series of Outstanding Debt Securities have the right to
waive compliance by the Operating Partnership with certain covenants relating to
such series of Debt Securities in the Indenture (Section 1014).
Modifications and amendments of the Indenture will be permitted to be made
by the Operating Partnership and the Trustee without the consent of any Holder
of Debt Securities for any of the following purposes: (i) to evidence the
succession of another Person to the Operating Partnership as obligor under the
Indenture; (ii) to add to the covenants of the Operating Partnership for the
benefit of the Holders of all or any series of Debt Securities or to surrender
any right or power conferred upon the Operating Partnership in the Indenture;
(iii) to add Events of Default for the benefit of the Holders of all or any
series of Debt Securities; (iv) to add or change any provisions of the Indenture
to facilitate the issuance of, or to liberalize certain terms of, Debt
Securities in bearer form, or to permit or facilitate the issuance of Debt
Securities in uncertificated form, provided, that such action shall not
adversely affect the interests of the Holders of the Debt Securities of any
series in any material respect; (v) to change or eliminate any provisions of the
Indenture, provided that any such change or elimination shall become effective
only when there are no Debt Securities Outstanding of any series created prior
thereto which are entitled to the benefit of such provision; (vi) to secure the
Debt Securities; (vii) to establish the form or terms of Debt Securities of any
series; (viii) to provide for the acceptance of appointment by a successor
Trustee or facilitate the administration of the trusts under the Indenture by
more than one Trustee; (ix) to cure any ambiguity, defect or inconsistency in
the Indenture, provided that such action shall not adversely affect the
interests of Holders of Debt Securities of any series in any material respect;
or (x) to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate defeasance and discharge of any series of such
Debt Securities, provided that such action shall not adversely affect the
interests of the Holders of the Debt Securities of any series in any material
respect (Section 901).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be Outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (ii) the principal amount
of a Debt Security denominated in a foreign currency that shall be deemed
Outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above), (iii) the
principal amount of an Indexed Security that shall be deemed Outstanding shall
be the principal face amount of such Indexed Security at original issuance,
unless otherwise provided with respect to such Indexed Security pursuant to the
Indenture; and (iv) Debt Securities owned by
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the Operating Partnership or any other obligor upon the Debt Securities or any
affiliate of the Operating Partnership or of such other obligor shall be
disregarded.
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501). A meeting will be permitted to be
called at any time by the Trustee, and also, upon request, by the Operating
Partnership or the holders of at least 10% in principal amount of the
Outstanding Debt Securities of such series, in any such case upon notice given
as provided in the Indenture (Section 1502). Except for any consent that must be
given by the Holder of each Debt Security affected by certain modifications and
amendments of the Indenture, any resolution presented at a meeting or adjourned
meeting duly reconvened at which a quorum is present will be permitted to be
adopted by the affirmative vote of the Holders of a majority in principal amount
of the Outstanding Debt Securities of that series; provided, however, that,
except as referred to above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the Holders of a specified percentage, which is less
than a majority, in principal amount of the Outstanding Debt Securities of a
series may be adopted at a meeting or adjourned meeting duly reconvened at which
a quorum is present by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of Holders of
Debt Securities of any series duly held in accordance with the Indenture will be
binding on all Holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
Persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may be
given by the Holders of not less than a specified percentage in principal amount
of the Outstanding Debt Securities of a series, the Persons holding or
representing such specified percentage in principal amount of the Outstanding
Debt Securities of such series will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
the Indenture expressly provides may be made, given or taken by the Holders of a
specified percentage in principal amount of all Outstanding Debt Securities
affected thereby, or of the Holders of such series and one or more additional
series: (i) there shall be no minimum quorum requirement for such meeting and
(ii) the principal amount of the Outstanding Debt Securities of such series that
vote in favor of such request, demand, authorization, direction, notice,
consent, waiver or other action shall be taken into account in determining
whether such request, demand, authorization, direction, notice, consent, waiver
or other action has been made, given or taken under the Indenture (Section
1504).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Operating Partnership may discharge certain obligations to Holders of
any series of Debt Securities that have not already been delivered to the
Trustee for cancellation and that either have become due and payable or will
become due and payable within one year (or scheduled for redemption within one
year) by irrevocably depositing with the Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities in respect of principal (and
premium, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be (Sections 1401 and 1404).
The Indenture provides that, if the provisions of Article Fourteen are made
applicable to the Debt Securities of or within any series pursuant to Section
301 of the Indenture, the Operating Partnership may elect either (a) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligation to pay additional amounts, if any, upon
the occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") (Section 1402) or (b) to be released from its obligations with
respect to such Debt Securities under sections 1004 to 1011, inclusive, of the
Indenture (including the restrictions
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described under "Certain Covenants") and its obligations with respect to any
other covenant, and any omission to comply with such obligations shall not
constitute a default or an Event of Default with respect to such Debt Securities
("covenant defeasance") (Section 1403), in either case upon the irrevocable
deposit by the Operating Partnership with the Trustee, in trust, of an amount,
in such currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at the stated maturity date
specified thereon ("Stated Maturity"), or Government Obligations (as defined
below), or both, applicable to such Debt Securities which through the scheduled
payment of principal and interest in accordance with their terms will provide
money in an amount sufficient to pay the principal of (and premium, if any) and
interest on such Debt Securities, and any mandatory sinking fund or analogous
payments thereon, on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Operating Partnership has delivered to the Trustee an Opinion of
Counsel (as specified in the Indenture) to the effect that the Holders of such
Debt Securities will not recognize income, gain or loss for U.S. Federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such Opinion of Counsel, in the case of
defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable United States Federal income tax law occurring
after the date of the Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Operating Partnership has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance with respect to Debt Securities of any
series; (a) the Holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
Conversion Event based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (i) a currency, currency unit or composite
currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
institutions of or within the international banking community, (ii) the ECU both
within the European Monetary System and for the settlement of transactions by
public institutions of or within the European Community or (iii) any currency
unit or composite currency other than the ECU for the purposes for which it was
established.
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Unless otherwise provided in the applicable Prospectus Supplement, all
payments of principal of (and premium, if any) and interest on any Debt Security
that is payable in a foreign currency that ceases to be used by its government
of issuance shall be made in U.S. dollars.
In the event the Operating Partnership effects covenant defeasance with
respect to any Debt Securities and such Debt Securities are declared due and
payable because of the occurrence of any Event of Default other than the Event
of Default described in clause (d) under "Events of Default, Notice and Waiver"
with respect to Sections 1004 to 1011, inclusive, of the Indenture (which
sections would no longer be applicable to such Debt Securities) or described in
clause (g) under "Events of Default, Notice and Waiver" with respect to any
other covenant as to which there has been covenant defeasance, the amount in
such currency, currency unit or composite currency in which such Debt securities
are payable, and Government Obligations on deposit with the Trustee, will be
sufficient to pay amounts due on such Debt Securities at the time of their
Stated Maturity but may not be sufficient to pay amounts due on such Debt
Securities at the time of the acceleration resulting from such event of Default.
However, the Operating Partnership would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
NO CONVERSION RIGHTS
The Debt Securities will not be convertible into or exchangeable for any
capital stock of the Company or equity interest in the Operating Partnership.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the applicable Prospectus Supplement relating to such series. Global Securities
may be issued in either registered or bearer form and in either temporary or
permanent form. The specific terms of the depositary arrangement with respect to
a series of Debt Securities will be described in the applicable Prospectus
Supplement relating to such series.
DESCRIPTION OF COMMON STOCK
GENERAL
The authorized common stock of the Company includes 100,000,000 shares of
Common Stock $.01 par value per share. Each outstanding share of Common Stock
entitles the holder to one vote on all matters presented to shareholders for a
vote. Holders of Common Stock have no preemptive rights. At June 30, 1997, there
were 22,044,296 shares of Common Stock outstanding, 5,216,474 shares reserved
for issuance upon exchange of outstanding Units and 1,045,140 shares reserved
for issuance upon exercise of outstanding stock options.
Shares of Common Stock currently outstanding are listed for trading on the
New York Stock Exchange (the "NYSE") under the symbol "PPS." The Company will
apply to the NYSE to list the additional shares of Common Stock to be sold
pursuant to any Prospectus Supplement, and the Company anticipates that such
shares will be so listed.
All shares of Common Stock issued will be duly authorized, fully paid, and
nonassessable. Distributions may be paid to the holders of Common Stock if and
when declared by the Board of Directors of the Company out of funds legally
available therefor.
Under Georgia law, shareholders are generally not liable for the Company's
debts or obligations. If the Company is liquidated, subject to the right of any
holders of preferred stock, if any, to receive preferential
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distributions, each outstanding share of Common Stock will be entitled to
participate pro rata in the assets remaining after payment of, or adequate
provision for, all known debts and liabilities of the Company.
PROVISIONS OF COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS
The Articles of Incorporation of the Company provide for the Board of
Directors to be divided into three classes of directors, each class to consist
as nearly as possible of one-third of the directors. At each annual meeting of
shareholders, the class of directors to be elected at such meeting will be
elected for a three-year term and the directors in the other two classes will
continue in office. The overall effect of the provisions in the Articles of
Incorporation with respect to the classified board may be to render more
difficult a change of control of the Company or removal of incumbent management.
Holders of Common Stock have no right to cumulative voting for the election of
directors. Consequently, at each annual meeting of shareholders, the holders of
a plurality of the shares of Common Stock are able to elect all of the
successors of the class of directors whose term expires at that meeting.
Directors may be removed only for cause and only with the affirmative vote of
the holders of a majority of the shares of Common Stock entitled to vote in the
election of directors.
OTHER MATTERS
The transfer agent and registrar for the Common Stock is Wachovia Bank of
North Carolina, N.A., Winston-Salem, North Carolina.
The Company may not engage in any merger, consolidation or other
combination with or into another person or sale of all or substantially all of
its assets unless such transaction includes the merger of the Operating
Partnership or sale of substantially all of the assets of the Operating
Partnership, which sale or merger must be approved by the holders of a majority
of the Units. If the Company were ever to hold less than a majority of the
Units, this voting requirement might limit the possibility for acquisition or
change in the control of the Company.
RESTRICTIONS ON TRANSFER
Ownership Limits. The Company's Articles of Incorporation contain certain
restrictions on the number of shares of Common Stock that a single shareholder
may own. For the Company to qualify as a REIT under the Code, no more than 50%
in value of its outstanding shares of Common Stock may be owned, actually and
constructively under the applicable attribution provisions of the Code, by five
or fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year (other than the first year) or during a
proportionate part of a shorter taxable year. The Common Stock must also be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year (other than the first year) or during a proportionate part of a shorter
taxable year. Because the Company has elected to be treated as a REIT, the
Articles of Incorporation of the Company contain restrictions on the acquisition
of Common Stock intended to ensure compliance with these requirements.
Subject to certain exceptions specified in the Articles of Incorporation,
no person other than Messrs. Williams and Glover may own, or be deemed to own by
virtue of the applicable attribution provisions of the Code, more than 6% (the
"Ownership Limit") of the outstanding shares of Common Stock. Messrs. Williams
and Glover are subject to a separate limitation (referred to as the "Excluded
Holder Limit") pursuant to which they are prohibited from owning (actually and
constructively under the applicable attribution provisions of the Code) more
than 31%, in the aggregate, of the outstanding shares of Common Stock. In
addition, Messrs. Williams and Glover are prohibited from acquiring any shares
of Common Stock if such acquisition would cause five individuals to own
(actually and constructively under the applicable attribution provisions of the
Code) in the aggregate more than 50% in value of the outstanding shares of
Common Stock.
If any shareholder purports to transfer shares to a person and either the
transfer would result in the Company failing to qualify as a REIT, or the
shareholder knows that such transfer would cause the transferee to hold more
than the applicable Ownership Limit or Excluded Holder Limit, the purported
transfer will be null and void as to that number of shares the transfer of which
would cause a violation of the applicable limit,
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and the shareholder will be deemed not to have transferred such excess shares.
In addition, if any person holds shares of Common Stock in excess of the
applicable Ownership Limit or Excluded Holder Limit, such person will be deemed
to hold the shares that cause the applicable limit to be exceeded in trust for
the Company, and will not receive dividends or distributions with respect to
such shares and will not be entitled to vote such shares. The person will be
required to sell such shares to the Company for the lesser of the amount paid
for the shares and the average of the last reported sales prices for the ten
trading days immediately preceding the redemption or to sell such shares at the
direction of the Company, in which case the Company will be reimbursed for its
expenses in connection with the sale plus any remaining amount of such proceeds
that exceeds the amount such person paid for the shares and such person will be
entitled to receive only the balance of the proceeds. If the Company repurchases
such shares, it may elect to pay for the shares with Units.
All certificates representing shares of Common Stock will bear a legend
referring to the restrictions described above.
Every owner of more than 5% (or such lower percentage as may be required by
the Code or regulations thereunder) of the issued and outstanding shares of
Common Stock must file a written notice with the Company containing the
information specified in the Articles of Incorporation no later than January 30
of each year. In addition, each shareholder shall upon demand be required to
disclose to the Company in writing such information as the Company may request
in good faith in order to determine the Company's status as a REIT.
The foregoing ownership limitations may have the effect of precluding
acquisition of control of the Company without the consent of the Board of
Directors.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The Company is authorized to issue 20,000,000 shares of preferred stock,
$0.01 par value per share, of which 1,000,000 8 1/2% Series A Cumulative
Redeemable Preferred Shares were outstanding at June 30, 1997.
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Articles of Incorporation (the "Articles
of Incorporation") and Bylaws and any applicable amendment to the Articles of
Incorporation designating terms of a series of Preferred Stock (a "Designating
Amendment").
TERMS
Subject to the limitations prescribed by the Articles of Incorporation, the
Board of Directors is authorized to fix the number of shares constituting each
series of Preferred Stock and the designations and powers, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions thereof, including such provisions as may be desired
concerning voting, redemption, dividends, dissolution or the distribution of
assets, conversion or exchange, and such other subjects or matters as may be
fixed by resolution of the Board of Directors. The Preferred Stock will, when
issued, be fully paid and nonassessable by the Company (except as described
under "-- Shareholder Liability" below) and will have no preemptive rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms thereof, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of such Preferred
Stock;
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(3) The dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(5) The procedures for any auction or remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred
Stock;
(7) The provision for redemption, if applicable, of such Preferred
Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock of the Company, including the
conversion price (or manner of calculation thereof);
(10) Whether interests in such Preferred Stock will be represented by
Depositary Shares;
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(12) A discussion of U.S. Federal income tax considerations applicable
to such Preferred Stock;
(13) The relative ranking of preferences of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;
(14) Any limitations on issuance of any series of Preferred Stock
ranking senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company; and
(15) Any limitations on direct or beneficial ownership and
restrictions on transfer, in each case an may be appropriate to preserve
the status of the Company as a REIT.
The applicable Prospectus Supplement will summarize the nature and scope of
any event risk provisions contained in any series of Preferred Stock, including
the types of events protected by such provisions and any limitations on the
Company's ability to satisfy its obligations under such provisions. The
applicable Prospectus Supplement will also summarize anti-takeover provisions in
other securities of the Operating Partnership or the Company, which could have a
material effect on any series of Preferred Stock. Such summary will contain a
detailed and quantifiable definition of any "change in control" provision.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Stock of the Company, and to all equity securities ranking
junior to such Preferred Stock; (ii) on a parity with all equity securities
issued by the Company the terms of which specifically provide that such equity
securities rank on a parity with the Preferred Stock; and (iii) junior to all
equity securities issued by the Company the terms of which specifically provide
that such equity securities rank senior to the Preferred Stock. The term "equity
securities" does not include convertible debt securities.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of assets
of the Company legally available for payment, cash dividends at such rates and
on such dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the share
transfer books of the Company on such record dates as shall be fixed by the
Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a
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dividend payable on a dividend payment date on any series of the Preferred Stock
for which dividends are non-cumulative, then the holders of such series of the
Preferred Stock will have no right to receive a dividend in respect of the
dividend period ending on such dividend payment date, and the Company will have
no obligation to pay the dividend accrued for such period, whether or not
dividends on such series are declared payable on any future dividend payment
date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Preferred Stock of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Stock does not have a cumulative dividend, full
dividends for the then current dividend period have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for such payment on the Preferred Stock of such series. When dividends
are not paid in full (or a sum sufficient for such full payment is not so set
apart) upon Preferred Stock of any series and the shares of any other series of
Preferred Stock ranking on a parity as to dividends with the Preferred Stock of
such series, all dividends declared upon Preferred Stock of such series and any
other series of Preferred Stock ranking on a parity as to dividends with such
Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share of Preferred Stock of such series and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock of such series (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend) and such
other series of Preferred Stock bear to each other. No interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other capital
shares ranking junior to the Preferred Stock of such series as to dividends and
upon liquidation) shall be declared or paid or set aside for payment or other
distribution shall be declared or made upon the Common Stock, or any other
capital shares of the Company ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation, nor shall
any shares of Common Stock, or any other capital shares of the Company ranking
junior to or on a parity with the Preferred Stock of such series as to dividends
or upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any such shares) by the Company (except by conversion into or
exchange for other capital shares of the Company ranking junior to the Preferred
Stock of such series as to dividends and upon liquidation).
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property,
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as specified in the applicable Prospectus Supplement. If the redemption price
for Preferred Stock of any series is payable only from the net proceeds of the
issuance of capital shares of the Company, the terms of such Preferred Stock may
provide that, if no such capital shares shall have been issued or to the extent
the net proceeds from any issuance are insufficient to pay in full the aggregate
redemption price then due, such Preferred Stock shall automatically and
mandatorily be converted into the applicable capital shares of the Company
pursuant to conversion provisions specified in the applicable Prospectus
Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all shares of any series
of Preferred Stock shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past dividend periods and the then current dividend period, and (ii) if such
series of Preferred Stock does not have a cumulative dividend, full dividends of
the Preferred Stock of any series have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart for
payment for the then current dividend period, no shares of any series of
Preferred Stock shall be redeemed unless all outstanding Preferred Stock of such
series is simultaneously redeemed; provided, however, that the foregoing shall
not prevent the purchase or acquisition of Preferred Stock of such series to
preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Preferred Stock of
such series. In addition, unless (i) if such series of Preferred Stock has a
cumulative dividend, full cumulative dividends on all outstanding shares of any
series of Preferred Stock have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past dividends periods and the then current dividend period, and (ii) if
such series of Preferred Stock does not have a cumulative dividend, full
dividends on the Preferred Stock of any series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, the Company shall
not purchase or otherwise acquire directly or indirectly any shares of Preferred
Stock of such series (except by conversion into or exchange for capital shares
of the Company ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation); provided, however, that the foregoing shall not
prevent the purchase or acquisition of Preferred Stock of such series to
preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Preferred Stock of
such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
or for which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by lot in a manner determined by the
Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the share transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the shares of Preferred Stock of any series are to
be redeemed, the notice mailed to each such holder thereof shall also specify
the number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Stock, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
shares of the Company ranking junior to the Preferred Stock in the distribution
of assets
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upon any liquidation, dissolution or winding up of the Company, the holders of
each series of Preferred Stock shall be entitled to receive out of assets of the
Company legally available for distribution to shareholders liquidating
distributions in the amount of the liquidation preference per share (set forth
in the applicable Prospectus Supplement), plus an amount equal to all dividends
accrued and unpaid thereon (which shall not include any accumulation in respect
of unpaid dividends for prior dividend periods if such Preferred Stock does not
have a cumulative dividend). After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Preferred Stock will
have no right or claim to any of the remaining assets of the Company. In the
event that, upon any such voluntary or involuntary liquidation, dissolution or
winding up, the available assets of the Company are insufficient to pay the
amount of the liquidating distributions on all outstanding Preferred Stock and
the corresponding amounts payable on all shares of other classes or series of
capital shares of the Company ranking on a parity with the Preferred Stock in
the distribution of assets, then the holders of the Preferred Stock and all
other such classes or series of capital shares shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital shares ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Company with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Company, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Whenever dividends on any shares of Preferred Stock shall be in arrears for
six or more consecutive quarterly periods, the holders of such shares of
Preferred Stock (voting separately as a class with all other series of Preferred
Stock upon which like voting rights have been conferred and are exercisable)
will be entitled to vote for the election of two additional directors of the
Company at a special meeting called by the holders of record of at least ten
percent (10%) of any series of Preferred Stock so in arrears (unless such
request is received less than 90 days before the date fixed for the next annual
or special meeting of the shareholders) or at the next annual meeting of
shareholders, and at each subsequent annual meeting until (i) if such series of
Preferred Stock has a cumulative dividend, all dividends accumulated on such
shares of Preferred Stock for the past dividend periods and the then current
dividend period shall have been fully paid or declared and a sum sufficient for
the payment thereof set aside for payment or (ii) if such series of Preferred
Stock does not have a cumulative dividend, four consecutive quarterly dividends
shall have been fully paid or declared and a sum sufficient for the payment
thereof set aside for payment. In such case, the entire Board of Directors of
the Company will be increased by two directors.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of at least two-thirds of the shares
of each series of Preferred Stock outstanding at the time, given in person or by
proxy, either in writing or at a meeting (such series voting separately as a
class), (i) authorize or create, or increase the authorized or issued amount of,
any class or series of capital stock ranking prior to such series of Preferred
Stock with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up or reclassify any authorized capital
stock of the Company into such shares, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase any
such shares; or (ii) amend, alter or repeal the provisions of the Company's
Articles of Incorporation or the Designating Amendment for such series of
Preferred Stock, whether by merger, consolidation or otherwise (an "Event"), so
as to materially and adversely affect any right, preference, privilege or voting
power of such series of Preferred Stock or the holder thereof; provided,
however, to the occurrence of any of the Events set forth in (ii) above, so long
as the Preferred Stock remains outstanding with the terms thereof materially
unchanged,
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taking into account that upon the occurrence of an Event, the Company may not be
the surviving entity, the occurrence of any such Event shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
power of holders of Preferred Stock and provided further that (x) any increase
in the amount of the authorized Preferred Stock or the creation or issuance of
any other series of Preferred Stock, or (y) any increase in the amount of
authorized shares of such series or any other series of Preferred Stock, in each
case ranking on a parity with or junior to the Preferred Stock of such series
with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
Under Georgia law, notwithstanding anything to the contrary set forth
above, holders of each series of Preferred Stock will be entitled to vote as a
class upon any proposed amendment to the Articles of Incorporation, whether or
not entitled to vote thereon by the Articles of Incorporation, if the amendment
would (i) increase or decrease the aggregate number of authorized shares of such
series; (ii) effect an exchange or reclassification of all or part of the shares
of the series into shares of another series; (iii) effect an exchange or
reclassification, or create the right of exchange, of all or part of the shares
of another class or series into shares of the series; (iv) change the
designation, rights, preferences or limitations of all or a part of the shares
of the series; (v) change the shares of all or part of the series into a
different number of shares of the same series; (vi) create a new series having
rights or preferences with respect to distributions or dissolution that are
prior, superior or substantially equal to the shares of the series; (vii)
increase the rights, preferences or number of authorized shares of any class or
series that, after giving effect to the amendment, have rights or preferences
with respect to distributions or to dissolution that are prior, superior or
substantially equal to the shares of the series; (viii) limit or deny an
existing preemptive right of all or part of the shares of the series; or (ix)
cancel or otherwise affect rights to distributions or dividends that have
accumulated but have not yet been declared on all or part of the shares of the
series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into shares of Common Stock will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
shares of Common Stock into which the shares of Preferred Stock are convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversions will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
SHAREHOLDER LIABILITY
As discussed below under "Description of Common Stock -- General,"
applicable Georgia law provides that no shareholder, including holders of
Preferred Stock, shall be personally liable for the acts and obligations of the
Company and that the funds and property of the Company shall be the only
recourse for such acts or obligations.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common Stock -- Restrictions on
Transfer," for the Company to qualify as a REIT under the Code, not more than
50% in value of its outstanding capital shares may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year. To assist the Company
in meeting this requirement, the Company may take certain actions to limit the
beneficial ownership, directly or indirectly, by a single person of the
Company's outstanding equity securities, including any Preferred Stock of the
Company. Therefore, the
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Designating Amendment for each series of Preferred Sock may contain provisions
restricting the ownership and transfer of the Preferred Stock. The applicable
Prospectus Supplement will specify any additional ownership limitation relating
to a series of Preferred Stock.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The Company may issue receipts ("Depositary Receipts") for Depositary
Shares, each of which will represent a fractional interest of a share of a
particular series of Preferred Stock, as specified in the applicable Prospectus
Supplement. Shares of Preferred Stock of each series represented by Depositary
Shares will be deposited under a separate deposit agreement (each, a "Deposit
Agreement") among the Company, the depositary named therein (a "Preferred Stock
Depositary") and the holders from time to time of the Depositary Receipts.
Subject to the terms of the applicable Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest of
a share of a particular series of Preferred Stock represented by the Depositary
Shares evidenced by such Depositary Receipt, to all the rights and preferences
of the Preferred Stock represented by such Depositary Shares (including
dividend, voting, conversion, redemption and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Stock by the Company to a Preferred Stock
Depositary, the Company will cause such Preferred Stock Depositary to issue, on
behalf of the Company, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from the Company upon
request, and the statements made hereunder relating to Deposit Agreements and
the Depositary Receipts to be issued thereunder are summaries of certain
anticipated provisions thereof and do not purport to be complete and are subject
to, and qualified in their entirety by reference to, all of the provisions of
the applicable Deposit Agreement and related Depositary Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
A Preferred Stock Depositary will be required to distribute all cash
dividends or other cash distributions received in respect of the applicable
Preferred Stock to the record holders of Depositary Receipts evidencing the
related Depositary Shares in proportion to the number of such Depositary
Receipts owned by such holders, subject to certain obligations of holders to
file proofs, certificates and other information and to pay certain charges and
expenses to such Preferred Stock Depositary.
In the event of a distribution other than in cash, a Preferred Stock
Depositary will be required to distribute property received by it to the record
holders of Depositary Receipts entitled thereto, subject to certain obligations
of holders to file proofs, certificates and other information and to pay certain
charges and expenses to such Preferred Stock Depositary, unless such Preferred
Stock Depositary determines that it is not feasible to make such distribution,
in which case such Preferred Stock Depositary may, with the approval of the
Company, sell such property and distribute the net proceeds from such sale to
such holders.
No distribution will be made in respect of any Depositary Share to the
extent that it represents any Preferred Stock which has been converted or
exchanged.
WITHDRAWAL OF STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the applicable Preferred Stock Depositary (unless the related Depositary Shares
have previously been called for redemption or converted),
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the holders thereof will be entitled to delivery at such office, to or upon each
such holder's order, of the number of whole or fractional shares of the
applicable Preferred Stock and any money or other property represented by the
Depositary Shares evidenced by such Depositary Receipts. Holders of Depositary
Receipts will be entitled to receive whole or fractional shares of the related
Preferred Stock on the basis of the proportion of Preferred Stock represented by
each Depositary Share as specified in the applicable Prospectus Supplement, but
holders of such shares of Preferred Stock will not thereafter be entitled to
receive Depositary Shares therefor. If the Depositary Receipts delivered by the
holder evidence a number of Depositary Shares in excess of the number of
Depositary Shares representing the number of shares of Preferred Stock to be
withdrawn, the applicable Preferred Stock Depositary will be required to deliver
to such holder at the same time a new Depositary Receipt evidencing such excess
number of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever the Company redeems shares of Preferred Stock held by a Preferred
Stock Depositary, such Preferred Stock Depositary will be required to redeem as
of the same redemption date the number of Depositary Shares representing shares
of the Preferred Stock so redeemed, provided the Company shall have paid in full
to such Preferred Stock Depositary the redemption price of the Preferred Stock
to be redeemed plus an amount equal to any accrued and unpaid dividends thereon
to the date fixed for redemption. The redemption price per Depositary Share will
be equal to the redemption price and any other amounts per share payable with
respect to the Preferred Stock. If fewer than all the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fractional Depositary Shares) or
by any other equitable method determined by the Company that preserves the REIT
status of the Company.
From and after the date fixed for redemption, all dividends in respect of
the shares of Preferred Stock so called for redemption will cease to accrue, the
Depositary Shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the Depositary Receipts evidencing
the Depositary Shares so called for redemption will cease, except the right to
receive any moneys payable upon such redemption and any money or other property
to which the holders of such Depositary Receipts were entitled upon such
redemption upon surrender thereof to the applicable Preferred Stock Depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the
applicable Preferred Stock are entitled to vote, a Preferred Stock Depositary
will be required to mail the information contained in such notice of meeting to
the record holders of the Depositary Receipts evidencing the Depositary Shares
which represent such Preferred Stock. Each record holder of Depositary Receipts
evidencing Depositary Shares on the record date (which will be the same date as
the record date for the Preferred Stock) will be entitled to instruct such
Preferred Stock Depositary as to the exercise of the voting rights pertaining to
the amount of Preferred Stock represented by such holder's Depositary Shares.
Such Preferred Stock Depositary will be required to vote the amount of Preferred
Stock represented by such Depositary Shares in accordance with such
instructions, and the Company will agree to take all reasonable action which may
be deemed necessary by such Preferred Stock Depositary in order to enable such
Preferred Stock Depositary to do so. Such Preferred Stock Depositary will be
required to abstain from voting the amount of Preferred Stock represented by
such Depositary Shares to the extent it does not receive specific instructions
from the holders of Depositary Receipts evidencing such Depositary Shares. A
Preferred Stock Depositary will not be responsible for any failure to carry out
any instruction to vote, or for the manner or effect of any such vote made, as
long as any such action or non-action is in good faith and does not result from
negligence or willful misconduct of such Preferred Stock Depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of each Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depositary Share evidenced by such Depositary
Receipt, as set forth in the applicable Prospectus Supplement.
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CONVERSION OF PREFERRED STOCK
The Depositary Shares, as such, will not be convertible into Common Stock
or any other securities or property of the Company. Nevertheless, if so
specified in the applicable Prospectus Supplement relating to an offering of
Depositary Shares, the Depositary Receipts may be surrendered by holders thereof
to the applicable Preferred Stock Depositary with written instructions to such
Preferred Stock Depositary to instruct the Company to cause conversion of the
Preferred Stock represented by the Depositary Shares evidenced by such
Depositary Receipts into whole shares of Common Stock, other shares of Preferred
Stock of the Company or other shares of stock, and the Company will agree that
upon receipt of such instructions and any amounts payable in respect thereof, it
will cause the conversion thereof utilizing the same procedures as those
provided for delivery of Preferred Stock to effect such conversion. If the
Depositary Shares evidenced by a Depositary Receipt are to be converted in part
only, a new Depositary Receipt or Receipts will be issued for any Depositary
Shares not to be converted. No fractional shares of Common Stock will be issued
upon conversion, and if such conversion will result in a fractional share being
issued, an amount will be paid in cash by the Company equal to the value of the
fractional interest based upon the closing price of the Common Stock on the last
business day prior to the conversion.
AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
Any form of Depositary Receipt evidencing Depositary Shares which will
represent Preferred Stock and any provision of a Deposit Agreement will be
permitted at any time to be amended by agreement between the Company and the
applicable Preferred Stock Depositary. However, any amendment that materially
and adversely alters the rights of the holders of Depositary Receipts or that
would be materially and adversely inconsistent with the rights granted to the
holders of the related Preferred Stock will not be effective unless such
amendment has been approved by the existing holders of at least two-thirds of
the applicable Depositary Shares evidenced by the applicable Depositary Receipts
then outstanding. No amendment shall impair the right, subject to certain
anticipated exceptions in the Deposit Agreements, of any holders of Depositary
Receipts to surrender any Depositary Receipt with instructions to deliver to the
holder the related Preferred Stock and all money and other property, if any,
represented thereby, except in order to comply with law. Every holder of an
outstanding Depositary Receipt at the time any such amendment becomes effective
shall be deemed, by continuing to hold such Depositary Receipt, to consent and
agree to such amendment and to be bound by the applicable Deposit Agreement as
amended thereby.
A Deposit Agreement will be permitted to be terminated by the Company upon
not less than 30 days' prior written notice to the applicable Preferred Stock
Depositary if (i) such termination is necessary to preserve the Company's status
as a REIT or (ii) a majority of each series of Preferred Stock affected by such
termination consents to such termination, whereupon such Preferred Stock
Depositary will be required to deliver or make available to each holder of
Depositary Receipts, upon surrender of the Depositary Receipts held by such
holder, such number of whole or fractional shares of Preferred Stock as are
represented by the Depositary Shares evidenced by such Depositary Receipts
together with any other property held by such Preferred Stock Depositary with
respect to such Depositary Receipts. The Company will agree that if a Deposit
Agreement is terminated to preserve the Company's status as a REIT, then the
Company will use its best efforts to list the Preferred Stock issued upon
surrender of the related Depositary Shares on a national securities exchange. In
addition, a Deposit Agreement will automatically terminate if (i) all
outstanding Depositary Shares thereunder shall have been redeemed, (ii) there
shall have been a final distribution in respect of the related Preferred Stock
in connection with any liquidation, dissolution or winding up of the Company and
such distribution shall have been distributed to the holders of Depositary
Receipts evidencing the Depositary Shares representing such Preferred Stock or
(iii) each share of the related Preferred Stock shall have been converted into
stock of the Company not so represented by Depositary Shares.
CHARGES OF A PREFERRED STOCK DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of a Deposit Agreement. In addition, the
Company will pay the fees and expenses of a Preferred Stock Depositary in
connection with the performance of its duties under a Deposit Agreement.
However,
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holders of Depositary Receipts will pay the fees and expenses of a Preferred
Stock Depositary for any duties requested by such holders to be performed which
are outside of those expressly provided for in the applicable Deposit Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
A Preferred Stock Depositary will be permitted to resign at any time by
delivering to the Company notice of its election to do so, and the Company will
be permitted at any time to remove a Preferred Stock Depositary, any such
resignation or removal to take effect upon the appointment of a successor
Preferred Stock Depositary. A successor Preferred Stock Depositary will be
required to be appointed within 60 days after delivery of the notice of
resignation or removal and will be required to be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
MISCELLANEOUS
A Preferred Stock Depositary will be required to forward to holders of
Depositary Receipts any reports and communications from the Company which are
received by such Preferred Stock Depositary with respect to the related
Preferred Stock.
Neither a Preferred Stock Depositary nor the Company will be liable if it
is prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under a Deposit Agreement. The obligations of the
Company and a Preferred Stock Depositary under a Deposit Agreement will be
limited to performing their duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of Preferred
Stock represented by the applicable Depositary Shares), gross negligence or
willful misconduct, and neither the Company nor any applicable Preferred Stock
Depositary will be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Receipts, Depositary Shares or shares of Preferred
Stock represented thereby unless satisfactory indemnity is furnished. The
Company and any Preferred Stock Depositary will be permitted to rely on written
advice of counsel or accountants, or information provided by persons presenting
shares of Preferred Stock represented thereby for deposit, holders of Depositary
Receipts or other persons believed in good faith to be competent to give such
information, and on documents believed in good faith to be genuine and signed by
a proper party.
In the event a Preferred Stock Depositary shall receive conflicting claims,
requests or instructions from any holders of Depositary Receipts, on the one
hand, and the Company on the other hand, such Preferred Stock Depositary shall
be entitled to act on such claims, requests or instructions received from the
Company.
FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTORY NOTES
This discussion summarizes the material Federal income tax considerations
that may be relevant to a prospective holder of the Securities. This discussion
is based on current law. The discussion is not exhaustive of all possible tax
considerations and does not give a detailed discussion of any state, local, or
foreign tax considerations. It also does not discuss all of the aspects of
Federal income taxation that may be relevant to a prospective holder of
securities in light of his particular circumstances or to certain types of
holders (including insurance companies, tax-exempt entities, financial
institutions or broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) who are subject to special treatment
under the Federal income tax laws. As used in this section, the term "Company"
refers solely to Post Properties, Inc.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND
SALE OF SECURITIES IN AN ENTITY ELECTING TO BE TAXED AS A REAL ESTATE INVESTMENT
TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES
OF SUCH PURCHASE, OWNERSHIP, SALE, AND ELECTION AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
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QUALIFICATION AND TAXATION OF THE COMPANY AS A REIT
The Company had made an election to be taxed as a REIT under Sections 856
through 860 of the Code effective for its short taxable year ending on December
31, 1993. The Company's qualification and taxation as a REIT depends upon the
Company's ability to meet on a continuing basis, through actual annual operating
results, distribution levels and diversity of stock ownership, the various
qualification tests and organizational requirements imposed under the Code, as
discussed below. The Company believes that it is organized and has operated in
such a manner as to qualify under the Code for taxation as a REIT commencing
with its 1993 taxable year, and the Company intends to continue to operate in
such a manner. No assurance, however, can be given that the Company will operate
in a manner so as to qualify or remain qualified as a REIT. See "Failure to
Qualify" below.
In the opinion of King & Spalding, the Company met the requirements for
qualification and taxation as a REIT for its taxable years ended December 31,
1993, 1994, 1995 and 1996, and its current and proposed method of operation
should enable it to continue to meet the requirements for qualification and
taxation as a REIT. This opinion is based on various assumptions relating to the
organization and operation of the Operating Partnership and the partnerships in
which the Operating Partnership owns or has owned an interest (referred to
herein as "Subsidiary Partnerships") and is conditioned upon certain
representations made by the Company as to certain relevant factual matters
relating to the organization and expected manner of operation of the Company,
the Operating Partnership, and the Subsidiary Partnerships. King & Spalding is
not aware of any facts or circumstances that are inconsistent with these
assumptions and representations. Moreover, such qualification and taxation as a
REIT will depend upon the Company's ability to meet on a continuing basis,
through actual annual operating results, distribution levels and diversity of
stock ownership, the various qualification tests imposed under the Code
discussed below. King & Spalding will not review compliance with these tests on
a continuing basis. No assurance can be given that the Company will satisfy such
tests on a continuing basis. See "Failure to Qualify" below.
The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex. The following discussion sets forth certain
material aspects of the Code sections that govern the Federal income tax
treatment of a REIT and its shareholders. The discussion is qualified in its
entirety by the applicable Code provisions, Treasury Regulations promulgated
thereunder and administrative and judicial interpretations thereof, all of which
are subject to change prospectively or retroactively.
So long as the Company continues to qualify for taxation as a REIT, it
generally will not be subject to Federal corporate income tax on its net income
that is distributed currently to its shareholders. That treatment substantially
eliminates the "double taxation" (i.e., taxation at both the corporate and
shareholder levels) that generally results from investment in a corporation.
However, the Company will be subject to Federal income tax in the following
circumstances. First, the Company will be taxed at regular corporate rates on
any undistributed REIT taxable income, including undistributed net capital
gains. Second, under certain circumstances, the Company may be subject to the
"alternative minimum tax" on items of tax preference, if any. Third, if the
Company has (i) net income from the sale or other disposition of "foreclosure
property" (which is, in general, property acquired by foreclosure or otherwise
on default of a loan or lease secured by the property) that is held primarily
for sale to customers in the ordinary course of business or (ii) other
nonqualifying income from foreclosure property, it will be subject to tax at the
highest corporate rate on such income. Fourth, if the Company has net income
from prohibited transactions (which are, in general, certain sales or other
dispositions of property (other than foreclosure property) held primarily for
sale to customers in the ordinary course of business), such income will be
subject to a 100% tax. Fifth, if the Company should fail to satisfy the 75%
gross income test or the 95% gross income test (as discussed below), and
nonetheless has maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the net income
attributable to the greater of the amounts by which it fails the 75% or 95%
gross income test. Sixth, if the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain net income for such year and (iii) any
undistributed taxable income from prior periods, it would be subject to a 4%
excise tax on the excess of such required distribution over the amounts actually
distributed. Finally, if the Company acquires any asset from a C corporation
(i.e., a corporation generally subject to full corporate-level tax) in a
transaction
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in which the basis of the asset in the Company's hands is determined by
reference to the basis of the asset (or any other property) in the hands of the
C corporation, and the Company recognizes gain on the disposition of such asset
during the ten-year period beginning on the date on which such asset was
acquired by the Company, then, to the extent of such property's "built-in" gain
(the excess of the fair market value of such property at the time of acquisition
by the Company over the adjusted basis of such property at such time), such gain
will be subject to the highest corporate rate applicable (as provided in
retroactive IRS regulations that were announced in IRS Notice 88-19 but which
have not yet been promulgated), provided an election is made by the Company to
apply the principles of Section 1374 of the Code to such gain (a "Notice 88-19
election").
When Columbus was formed in 1993, it acquired certain built-in gain assets
from a C corporation in a carryover basis transaction. Columbus believes that
the aggregate built-in gain with respect to such assets is approximately $7.8
million. Columbus filed a Notice 88-19 election with its first REIT tax return
for the taxable year ended December 31, 1993. Accordingly, the Company (as
Columbus' successor) should be subject to a Section 1374 corporate-level tax
(assuming the retroactive regulations announced in Notice 88-19 are eventually
issued by the IRS) if the Company or the Operating Partnership sells a built-in
gain asset in a taxable transaction during the ten-year period commencing on the
date such assets were originally acquired by Columbus. The Company will likewise
file a Notice 88-19 election with respect to the built-in gain assets acquired
from Columbus, but the Company has no current intention to sell any of the
built-in gain assets that will be acquired from Columbus.
REQUIREMENTS FOR QUALIFICATION
The Code defines a REIT as a corporation, trust or association (i) that is
managed by one or more trustees or directors; (ii) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (iii) that would be taxable as a domestic corporation, but
for Sections 856 through 860 of the Code; (iv) that is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(v) the beneficial ownership of which is held by 100 or more persons; (vi) not
more than 50% in value of the outstanding shares of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of each taxable year (the "5/50 Rule");
(vii) that makes an election to be a REIT (or has made such election for a
previous taxable year which has not been revoked or terminated) and satisfies
all relevant filing and other administrative requirements established by the IRS
that must be met in order to elect and maintain REIT status; (viii) that uses a
calendar year for Federal income tax purposes and complies with the
recordkeeping requirements of the Code and Treasury Regulations promulgated
thereunder; and (ix) that meets certain other tests, described below, regarding
the nature of its income and assets. The Code provides that conditions (i) to
(iv), inclusive, must be met during the entire taxable year and that condition
(v) must be met during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than 12 months. For
purposes of determining stock ownership under the 5/50 Rule, a supplemental
unemployment compensation benefits plan, a private foundation or a portion of a
trust permanently set aside or used exclusively for charitable purposes
generally is considered an individual. A trust that is a qualified trust under
Section 401(a) of the Code, however, generally is not considered an individual
and beneficiaries of such trust are treated as holding shares of a REIT in
proportion to their actuarial interests in such trust for purposes of the 5/50
Rule. Finally, under the Taxpayer Relief Act of 1997 signed by the President on
August 5, 1997 (the "1997 Act"), for its taxable years beginning after December
31, 1997, the Company will be treated as having met condition (vi) above if it
has complied with certain Treasury regulations for ascertaining the ownership of
its stock for such year and if it did not know (or after the exercise of
reasonable diligence would not have known) that its stock was sufficiently
closely held during such year to cause it to fail condition (vi).
The Company's Articles of Incorporation contains restrictions regarding the
transfer of its shares that are intended to assist the Company in continuing to
satisfy the share ownership requirements described in clauses (v) and (vi)
above. See "Capital Stock of the Company -- Restrictions on Transfer."
Section 856(i) of the Code provides that a corporation that is a "qualified
REIT subsidiary" shall not be treated as a separate corporation for Federal
income tax purposes, and all assets, liabilities and items of
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income, deduction and credit of a "qualified REIT subsidiary" shall be treated
as assets, liabilities and items of income, deduction and credit of the REIT.
For taxable years ending on or before December 31, 1997, a "qualified REIT
subsidiary" is a corporation, all of the capital stock of which has been held by
the REIT "at all times during the period such corporation was in existence."
Under the 1997 Act, for post-1997 taxable years the stock of a qualified REIT
subsidiary no longer needs to have been held by the REIT "at all times during
the period such corporation was in existence." Certain subsidiaries of the
Company constitute qualified REIT subsidiaries. Accordingly, in applying the
income and asset tests described below, such subsidiaries will be ignored for
Federal income tax purposes, and all assets, liabilities and items of income,
deduction and credit of such subsidiaries will be treated as assets, liabilities
and items of income, deduction, and credit of the Company. Such subsidiaries
therefore will not be subject to Federal corporate income taxation, although
they may be subject to state and local taxation.
In the case of a REIT that is a partner in an entity that is classified for
Federal income tax purposes as a partnership, Treasury Regulations provide that
the REIT will be deemed to own its proportionate share of the assets of the
partnership (based on the REIT's capital interest in the partnership) and will
be deemed to be entitled to the gross income of the partnership attributable to
such share. In addition, the assets and gross income of the partnership will
retain the same character in the hands of the REIT for purposes of Section 856
of the Code, including satisfying the gross income and asset tests described
below. The ownership of interests in the Operating Partnership by the Company
will result in its proportionate share of the assets, liabilities and items of
income of the Operating Partnership being treated as assets, liabilities and
items of income of the Company for purposes of the asset and income tests
described below.
Income Tests. For its taxable years ending on or before December 31, 1997,
in order for the Company to maintain its qualification as a REIT, three
requirements relating to gross income must be satisfied annually. First, at
least 75% of its gross income (excluding gross income from prohibited
transactions) for each taxable year must consist of defined types of income
derived directly or indirectly from investments relating to real property or
mortgages on real property (including "rents from real property" and, in certain
circumstances, interest) or temporary investment income. Second, at least 95% of
its gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived from such real property or temporary investments,
and from dividends, other types of interest and gain from the sale or
disposition of stock or securities, or from any combination of the foregoing.
Third, for each taxable years ending on or before December 31, 1997, short-term
gain from the sale or other disposition of stock or securities, gain from
prohibited transactions, and gain on the sale or other disposition of real
property held for less than four years (apart from involuntary conversions and
sales of foreclosure property) must represent less than 30% of the REIT's gross
income (including gross income from prohibited transactions) for each taxable
year (the "30% Gross Income Test"). Under the 30% Gross Income Test, if a REIT
holds an interest in a partnership that sells real property or if the REIT sells
its interest in a partnership that holds real property, the gross income derived
from such sale, to the extent attributable to real property, is deemed to be
derived from the sale of real property held for the shorter of the period that
the partnership held the property or the period that the REIT held its
partnership interest. The 1997 Act repeals the 30% Gross Income Test effective
for the Company's taxable year beginning January 1, 1998.
The rent received by the Company from its tenants will qualify as "rents
from real property" in satisfying the gross income requirements for a REIT
described above only if several conditions are met. First, the amount of rent
must not be based, in whole or in part, on the income or profits of any person.
However, an amount received or accrued generally will not be excluded from the
term "rents from real property" solely by reason of being based on a fixed
percentage or percentages of receipts or sales. Second, the Code provides that
rents received from a tenant of the Company will not qualify as "rents from real
property" in satisfying the gross income tests if the Company, or a direct or
indirect owner of 10% or more of the Company, directly or constructively owns
10% or more of such tenant (a "Related Party Tenant"). Third, if rent
attributable to personal property that is leased in connection with a lease of
real property is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not qualify
as "rents from real property." Finally, for the rent to qualify as "rents from
real property," the Company generally must not operate or manage its properties
or furnish or render services to the tenants of such
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properties, other than through an "independent contractor" who is adequately
compensated and from whom the Company derives or receives no income. The
"independent contractor" requirement, however, does not apply to the extent the
services provided by the Company are "usually or customarily rendered" in
connection with the rental of space for occupancy only and are not otherwise
considered "rendered to the occupant." In addition, for the Company's taxable
years beginning after December 31, 1997, the "independent contractor"
requirement will not apply to noncustomary services provided by the Company, the
annual value of which does not exceed 1% of the gross income derived from the
property with respect to which the services are provided (the "1% de minimis
exception"). For this purpose, such services may not be valued at less than 150%
of the Company's direct cost of providing the services.
The Company does not charge rent for any portion of any property that is
based, in whole or in part, on the income or profits of any person. In addition,
the Company does not receive any material rent from a Related Party Tenant.
Finally, any noncustomary services will be provided through qualifying
independent contractors or, for post-1997 taxable years, will satisfy the 1% de
minimis exception.
The Operating Partnership receives fees in consideration of the performance
of management, landscaping and administrative services with respect to
properties that are not wholly owned, directly or indirectly, by the Operating
Partnership. A portion of such fees (corresponding to that portion of any such
property owned by a third party) generally will not qualify under the 75% or 95%
gross income tests. The Company will also receive certain other types of
non-qualifying income, including its allocable share of any dividends paid by
Post Services to the Operating Partnership (which will qualify under the 95%
gross income test but not under the 75% gross income test). The Company
believes, however, that the aggregate amount of such fees and other
non-qualifying income in any taxable year will not cause the Company to exceed
the limits on non-qualifying income under the 75% and 95% gross income tests.
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it nevertheless may qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. Those relief
provisions generally will be available if the failure to meet such tests is due
to reasonable cause and not due to willful neglect, the Company attaches a
schedule of the sources of its income to its return, and any incorrect
information on the schedule was not due to fraud with intent to evade tax. It is
not possible, however, to state whether in all circumstances the Company would
be entitled to the benefit of those relief provisions. As discussed above in
"-- Qualification and Taxation of the Company as a REIT," even if those relief
provisions apply, a 100% tax would be imposed on the net income attributable to
the greater of the amount by which the Company fails the 75% and 95% gross
income tests. No such relief is available for violations of the 30% Gross Income
Test (which, as noted above, has been repealed commencing with the Company's
1998 taxable year).
Asset Tests. At the close of each quarter of its taxable year, the Company
also must satisfy three tests relating to the nature of its assets. First, at
least 75% of the value of the Company's total assets must be represented by real
estate assets, including (i) its allocable share of real estate assets held by
the Operating Partnership and any subsidiary partnerships or limited liability
companies, and (ii) stock or debt instruments held for not more than one year
purchased with the proceeds of a stock offering or long-term (at least five
years) public debt offering of the Company, cash, cash items and government
securities. Second, not more than 25% of the Company's total assets may be
represented by securities other than those in the 75% asset class. Third, of the
investments included in the 25% asset class, the value of any one issuer's debt
and equity securities owned by the Company (including its allocable share of
such securities owned by the Operating Partnership) may not exceed 5% of the
value of the Company's total assets, and the Company may not own more than 10%
of any one issuer's outstanding voting securities. Debt of an issuer that is
secured by real estate assets does not constitute a "security" for purposes of
the 5% asset test. The 5% asset test generally must be met for any quarter in
which a REIT acquires securities of an issuer or other property. Thus, this
requirement must be satisfied not only on the date that the Company initially
acquires securities of Post Services, but also each time the Company increases
its ownership of securities of Post Services (e.g. as limited partners exercise
their redemption rights).
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As described above, the Operating Partnership owns 100% of the nonvoting
stock and 1% of the voting stock of Post Services. In addition, the Operating
Partnership also holds a note of Post Services. By virtue of its ownership of an
interest in the Operating Partnership, the Company is deemed to own its pro rata
share of assets of the Operating Partnership and any subsidiary partnerships,
including the securities of Post Services. Because the Operating Partnership
does not own more than 10% of the voting securities of Post Services, the
Company likewise does not own more than 10%. In addition, based upon its
analysis of the estimated value of the debt and equity securities of Post
Services owned by the Operating Partnership relative to the estimated value of
the other assets owned by the Operating Partnership, the Company believes that
its pro rata share of the debt and equity securities of Post Services at all
relevant times has been less than 5% of the total value of the Company's assets.
However, no independent appraisals have been obtained to support this
conclusion, and King & Spalding, in rendering its opinion as to the Company's
qualification as a REIT, is relying on the Company's representation with respect
to the value of Post Services and its wholly owned subsidiaries. After
reasonable inquiry, King & Spalding is not aware of any facts inconsistent with
such representation. Although the Company plans to take steps to ensure that it
satisfies the 5% value test for any quarter with respect to which any actual or
deemed acquisition of the securities of Post Securities is to occur, there can
be no assurance that such steps will always be successful or will not require a
reduction in the Operating Partnership's overall interest in Post Services.
Distribution Requirements. The Company, in order to qualify as a REIT, is
required to distribute with respect to each taxable year dividends (other than
capital gain dividends) to its shareholders in an aggregate amount at least
equal to (i) the sum of (A) 95% of its "REIT taxable income" (computed without
regard to the dividends paid deduction and its net capital gain) and (B) 95% of
the net income (after tax), if any, from foreclosure property, minus (ii) the
sum of certain items of non-cash income. Such distributions must be paid in the
taxable year to which they relate, or in the following taxable year if declared
before the Company timely files its Federal income tax return for such year and
if paid on or before the first regular dividend payment date after such
declaration. To the extent that the Company does not distribute all of its net
capital gain or distributes at least 95%, but less than 100%, of its "REIT
taxable income," as adjusted, it will be subject to tax thereon at regular
ordinary and capital gains corporate tax rates. Furthermore, if the Company
should fail to distribute during each calendar year at least the sum of (i) 85%
of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain
income for such year and (iii) any undistributed taxable income from prior
periods, it would be subject to a 4% nondeductible excise tax on the excess of
such required distribution over the amounts actually distributed.
The Company has made and intends to continue to make timely distributions
sufficient to satisfy the annual distribution requirements. In this regard, the
Partnership Agreement authorizes the Company, as general partner, to take such
steps as may be necessary to cause the Operating Partnership to distribute to
its partners an amount sufficient to permit the Company to meet these
distribution requirements. It is possible, however, that the Company, from time
to time, may not have sufficient cash or other liquid assets to meet the
distribution requirements due to timing differences between the actual receipt
of income and actual payment of deductible expenses and the inclusion of such
income and deduction, of such expenses in arriving at the Company's taxable
income, or if the amount of nondeductible expenses (such as principal
amortization or capital expenses) exceed the amount of noncash deductions. In
the event that such timing differences occur, in order to meet the distribution
requirements, the Company may cause the Operating Partnership to arrange for
short-term, or possibly long-term, borrowing to permit the payment of required
dividends. If the amount of nondeductible expenses exceeds noncash deductions,
the Operating Partnership may refinance its indebtedness to reduce principal
payments and borrow funds for capital expenditures.
Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirements for a year by paying "deficiency
dividends" to its shareholders in a later year, which may be included in its
deduction for dividends paid for the earlier year. Although the Company may be
able to avoid being taxed on amounts distributed as deficiency dividends, it
will be required to pay to the IRS interest based upon the amount of any
deduction taken for deficiency dividends.
Recordkeeping Requirements. Pursuant to applicable Treasury Regulations,
in order to maintain qualification as a REIT, the Company must maintain certain
records and request on an annual basis certain
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information from its shareholders designed to disclose the actual ownership of
its outstanding shares. The Company intends to comply with these requirements.
FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, it will be subject to tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Distributions to shareholders in any year in which the Company fails to
qualify will not be deductible nor will they be required to be made. In such
event, to the extent of current and accumulated earnings and profits, all
distributions to shareholders will be taxable as ordinary income and, subject to
certain limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, the Company also will be disqualified from taxation as a REIT for
the four taxable years following the year during which it ceased to qualify as a
REIT. It is not possible to predict whether in all circumstances the Company
would be entitled to such statutory relief.
OTHER TAX CONSIDERATIONS
Tax Status of Operating Partnership and Other Pass-Through Entities. All
of the Company's investments have been made through the Operating Partnership,
which in turn holds an interest in a subsidiary partnership (the "Subsidiary
Partnership"). In the opinion of King & Spalding, the Operating Partnership and
the Subsidiary Partnership each qualify as a partnership for Federal income tax
purposes and not as an association taxable as a corporation or as a publicly
traded partnership.
A publicly traded partnership is a partnership whose interests are traded
on an established securities market or are readily tradable on a secondary
market or the substantial equivalent of a secondary market. The Treasury
Department recently issued regulations effective for taxable years beginning
after December 31, 1995 (the "PTP Regulations") that provide limited safe
harbors, which, if satisfied, will prevent a partnership's interests from being
treated as readily tradable on a secondary market or the substantial equivalent
thereof. The "private placement" safe harbor applies if (i) all interests in the
partnership were issued in a transaction (or transactions) that was not required
to be registered under the Securities Act and (ii) the partnership does not have
more than 100 partners at any time during the partnership's taxable year. In
determining the number of partners in a partnership, a person owning an interest
in a flow-through entity (i.e., a partnership, grantor trust, or S corporation)
that owns an interest in the partnership is treated as a partner in such
partnership only if (i) substantially all of the value of the person's interest
in the flowthrough entity is attributable to the flow-through entity's interest
(direct or indirect) in the partnership and (ii) a principal purpose of the use
of the tiered arrangement is to permit the partnership to satisfy the
100-partner limitation. The Operating Partnership does not currently meet the
private placement safe harbor of the PTP Regulations because it has more than
100 partners.
Under a special grandfather rule, an existing partnership may continue to
rely on safe harbors contained in IRS Notice 88-75 for a 10-year period. The
Company believes that the Operating Partnership has satisfied, and will continue
to satisfy, the private placement safe harbor under such Notice because, in
part, it has fewer than 500 direct and indirect partners. Upon expiration of the
grandfather period, if the Operating Partnership does not at that time satisfy
the private placement safe harbor of the PTP Regulations, it is possible that
the Operating Partnership could be classified as a publicly traded partnership.
In that event, the Operating Partnership should satisfy a special "passive
income" exception provided in Section 7704(c) of the Code and therefore should
not be subject to Federal income tax at the corporate level. However, if the
Operating Partnership were classified as a publicly traded partnership, the
partners of the Operating Partnership would nevertheless be subject to special
passive loss rules in Section 469(k) of the Code.
If the Operating Partnership were treated as an association taxable as a
corporation, the Company would fail the 75% asset test. Further, if the
Subsidiary Partnership were treated as a taxable corporation, then the Company
would cease to qualify as a REIT if the Company's ownership interest in such
partnership exceeded 10% of the partnership's voting interests or the value of
such interest exceeded 5% of the value of the Company's assets. Furthermore, in
such a situation, distributions from the Subsidiary Partnership to Post
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would be treated as dividends, which are not taken into account in satisfying
the 75% gross income test described above and which could therefore make it more
difficult for the Company to meet such test. Finally, the Company would not be
able to deduct its share of losses generated by any of the Subsidiary
Partnerships in computing its taxable income. See "-- Failure to Qualify" above
for a discussion of the effect of the Company's failure to meet such tests for a
taxable year.
Taxation of Post Services and Operating Subsidiaries. Post Services and
its existing subsidiaries file a corporate consolidated return for federal
income tax purposes. The consolidated taxable income of these companies is
subject to tax at regular corporate rates. To the extent such entities are
required to pay Federal, state and local income taxes, the cash available for
distribution to shareholders will be correspondingly reduced.
State and Local Taxes. The Company and its shareholders may be subject to
state or local taxation in various state or local jurisdictions, including those
in which it or they transact business or reside (although shareholders who are
individuals generally should not be required to file state income tax returns
outside of their state of residence with respect to the Company's operations and
distributions). The state and local tax treatment of the Company and its
shareholders may not conform to the Federal income tax consequences discussed
above. Consequently, prospective shareholders should consult their own tax
advisors regarding the effect of state and local tax laws on an investment in
the Securities.
TAXATION OF TAXABLE U.S. SHAREHOLDERS
As long as the Company qualifies as a REIT, distributions made to taxable
U.S. Shareholders (as hereinafter defined) out of current or accumulated
earnings and profits (and not designated as capital gain dividends) will be
taken into account by such U.S. Shareholders (as hereinafter defined) as
ordinary income and will not be eligible for the dividends received deduction
generally available to corporations. As used herein, the term "U.S. Shareholder"
means a holder of the Company's shares that for United States Federal income tax
purposes is (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof, (iii) an estate the
income of which is subject to United States Federal income taxation regardless
of its source, or (iv) a trust if (A) a court within the United States is able
to exercise primary supervision over the administration of the trust, and (B)
one or more United States persons have the authority to control all substantial
decisions of the trust. Distributions that are designated as capital gain
dividends will be taxed as gain from the sale or exchange of a capital asset
held for more than one year (to the extent they do not exceed the payor's actual
net capital gain for the taxable year) without regard to the period for which
the U.S. Shareholder has held his or her shares. However, corporate U.S.
Shareholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income. Distributions in excess of current and accumulated
earnings and profits will not be taxable to a U.S. Shareholder to the extent
that they do not exceed the adjusted basis of the U.S. Shareholder's shares, but
will reduce the adjusted basis of such shares. To the extent that such
distributions in excess of current and accumulated earnings and profits exceed
the adjusted basis of a U.S. Shareholder's shares, such distributions will be
included in income as capital gain, assuming that such shares are capital assets
in the hands of the U.S. Shareholder. The tax rate to which such capital gain
will be subject will depend on the U.S. Shareholder's holding period for his
shares. See "-- Capital Gains Rates Under the 1997 Act" below. In addition, any
distribution declared by the Company in October, November or December of any
year and payable to a U.S. Shareholder of record on a specified date in any such
month shall be treated as both paid by the payor and received by the U.S.
Shareholder on December 31 of such year, provided that the distribution is
actually paid by the payor during January of the following calendar year.
For its taxable years beginning after December 31, 1997, the Company may
make an election with respect to all or part of its undistributed net capital
gain. If the Company should make such an election, its shareholders would be
required to include in their income as long-term capital gain their
proportionate share of the Company's undistributed net capital gain as
designated by the Company. The tax rate applicable to such gain is not clear
under the 1997 Act. See "-- Capital Gains Rates Under the 1997 Act" below. Each
such shareholder would be deemed to have paid his proportionate share of the
income tax imposed on the Company with respect to such undistributed net capital
gain, and this amount would be credited or refunded
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to the shareholder. In addition, the tax basis of the shareholder's stock would
be increased by his proportionate share of undistributed net capital gains
included in his income less his proportionate share of the income tax imposed on
the Company with respect to such gains.
U.S. Shareholders may not include in their individual income tax returns
any net operating losses or capital losses of the Company. Instead, such losses
would be carried over by the Company for potential offset against its future
income (subject to certain limitations). Taxable distributions from the Company
and gain from the disposition of its shares will not be treated as passive
activity income and, therefore, U.S. Shareholders generally will not be able to
apply any "passive activity losses" (such as losses from certain types of
limited partnerships in which a shareholder is a limited partner) against such
income. In addition, taxable distributions from the Company generally will be
treated as investment income for purposes of the investment interest
limitations. Capital gains from the disposition of the Company's shares (or
distributions treated as such), however, will be treated as investment income
only if the U.S. Shareholder so elects, in which case such capital gains will be
taxed at ordinary income rates. The Company will notify shareholders after the
close of the Company's taxable year as to the portions of the distributions
attributable to that year that constitute ordinary income, return of capital and
capital gain.
TAXATION OF U.S. SHAREHOLDERS ON THE DISPOSITION OF THE COMPANY'S SHARES
In general, any gain or loss realized upon a taxable disposition of the
Company's shares by a U.S. Shareholder who is not a dealer in securities will be
treated as a capital gain or loss. Lower marginal tax rates for individuals may
apply in the case of capital gains, depending on the holding period of the
Company's shares that are sold. See "-- Capital Gains Rates Under the 1997 Act"
below. However, any loss upon a sale or exchange by a U.S. Shareholder who has
held such shares for six months or less (after applying certain holding period
rules), will be treated as a long-term capital loss to the extent of
distributions from the Company required to be treated by such U.S. Shareholder
as long-term capital gain. All or a portion of any loss realized upon a taxable
disposition of the Company's shares may be disallowed if other Company shares
are purchased within 30 days before or after the disposition. In addition,
capital losses not offset by capital gains may be deducted from an individual's
ordinary income only up to a maximum of $3,000 per year. Unused capital losses
may be carried forward. A corporate taxpayer may deduct capital losses only to
the extent of capital gains, but may carry unused capital losses back three
years and forward five years.
CAPITAL GAINS RATES UNDER THE 1997 ACT
In general, under the 1997 Act, the maximum tax rate on an individual's net
capital gain is reduced from 28-percent to 20-percent. In addition, any net
capital gain which otherwise would be taxed at a 15-percent rate is taxed at a
10-percent rate. However, the rates applicable to ordinary income continue to
apply to the sale or exchange of capital assets held for one year or less, and
the applicable tax rates under prior law, rather than the new 20-percent and
10-percent rates, will continue to apply to the sale or exchange of capital
assets held for more than one year but not more than 18 months. It is unclear
how the applicable rate is determined in the case of capital gain dividends paid
by a REIT, which, under Section 857 of the Code, are required to be treated as
"gain from the sale or exchange of a capital asset held for more than one year."
The Treasury Department is authorized to issue regulations that address the
application of the new capital gains rates to sales and exchanges by REITs and
to sales and exchanges of interests in REITs, but no such regulations have been
issued.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
The Company will report to its U.S. Shareholders and to the IRS the amount
of distributions paid during each calendar year, and the amount of tax withheld,
if any. Under the backup withholding rules, a U.S. Shareholder may be subject to
backup withholding at the rate of 31% with respect to distributions paid unless
such holder (i) is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact or (ii) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with the applicable requirements of the
backup withholding rules. A U.S. Shareholder who does not provide the Company
with his correct taxpayer identification number
34
<PAGE> 99
also may be subject to penalties imposed by the IRS. Any amount paid as backup
withholding will be creditable against the U.S. Shareholder's income tax
liability. In addition, the Company may be required to withhold a portion of
capital gain distributions to any U.S. Shareholders who fail to certify their
nonforeign status to the Company. See "-- Taxation of Non-U.S. Shareholders."
TAXATION OF TAX-EXEMPT SHAREHOLDERS
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from Federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the IRS has issued a published ruling
that dividend distributions from a REIT to an exempt employee pension trust do
not constitute UBTI, provided that the shares of the REIT are not otherwise used
in an unrelated trade or business of the exempt employee pension trust. Based on
that ruling, amounts distributed by the Company to Exempt Organizations
generally should not constitute UBTI. However, if an Exempt Organization
finances its acquisition of shares with "acquisition indebtedness," a portion of
its income from distributions on such shares will constitute UBTI pursuant to
the "debt-financed property" rules. Furthermore, social clubs, voluntary
employee benefit associations, supplemental unemployment benefit trusts and
qualified group legal service plans that are exempt from taxation under
paragraphs (7), (9), (17) and (20), respectively, of Code section 501(c) are
subject to different UBTI rules, which generally will require them to
characterize distributions from the Company as UBTI. In addition, in certain
circumstances, a pension trust that owns more than 10% of the shares would be
required to treat a percentage of the dividends on its shares as UBTI (the "UBTI
Percentage"). The UBTI Percentage is the gross income, less related direct
expenses, derived by Post from an unrelated trade or business (determined as if
the Company were a pension trust) divided by the gross income, less related
direct expenses, of the Company for the year in which the dividends are paid.
The UBTI rule applies to a pension trust holding more than 10% of the Common
Stock only if (i) the UBTI Percentage is at least 5%, (ii) Post qualifies as a
REIT by reason of the modification of the 5/50 Rule that allows the
beneficiaries of the pension trust to be treated as holding shares of the
Company, in proportion to their actuarial interests in the pension trust and
(iii) either (A) one pension trust owns more than 25% of the value of such
shares or (B) a group of pension trusts individually holding more than 10% of
the value of shares collectively owns more than 50% of the value of the shares.
TAXATION OF NON-U.S. SHAREHOLDERS
The rules governing United States Federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and other foreign
holders of the Company's shares (collectively, "Non-U.S. Shareholders") are
complex and no attempt will be made herein to provide more than a summary of
such rules. NON-U.S. SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO
DETERMINE THE IMPACT OF FEDERAL, STATE AND LOCAL INCOME TAX LAWS WITH REGARD TO
AN INVESTMENT IN THE SECURITIES, INCLUDING ANY REPORTING REQUIREMENTS.
Distributions to Non-U.S. Shareholders that are not attributable to gain
from sales or exchanges by the Company of United States real property interests
and are not designated by the Company as capital gain dividends will be treated
as dividends of ordinary income to the extent that they are made out of the
Company's current or accumulated earnings and profits. Such distributions
ordinarily will be subject to a withholding tax equal to 30% of the gross amount
of the distribution unless an applicable tax treaty reduces or eliminates that
tax. However, if income from the investment in shares is treated as effectively
connected with the Non-U.S. Shareholder's conduct of a United States trade or
business, the Non-U.S. Shareholder generally will be subject to Federal income
tax at graduated rates, in the same manner as U.S. Shareholders are taxed with
respect to such distributions (and also may be subject to the 30% branch profits
tax in the case of a Non-U.S. Shareholder that is a corporate Non-U.S.
Shareholder). The Company expects to withhold United States income tax at the
rate of 30% on the gross amount of any such distributions made to a Non-U.S.
Shareholder unless (i) a lower treaty rate applies and any required form
evidencing eligibility for that reduced rate is filed with the Company or (ii)
the Non-U.S. Shareholder files an IRS Form 4224 with the Company
35
<PAGE> 100
claiming that the distribution is effectively connected income. The IRS issued
proposed regulations in April 1996 that would modify the manner in which the
Company complies with the withholding requirements.
Distributions in excess of current and accumulated earnings and profits of
the Company will not be taxable to a shareholder to the extent that such
distributions do not exceed the adjusted basis of the shareholder's shares but
rather will reduce the adjusted basis of such shares. To the extent that
distributions in excess of current and accumulated earnings and profits exceed
the adjusted basis of a Non-U.S. Shareholder's shares, such distributions will
give rise to tax liability if the Non-U.S. Shareholder otherwise would be
subject to tax on any gain from the sale or disposition of his shares as
described below. Because it generally cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the entire amount of any
distribution normally will be subject to withholding at the same rate as a
dividend. However, amounts so withheld are refundable to the extent it is
determined subsequently that such distribution was, in fact, in excess of the
payor's current and accumulated earnings and profits.
The Company is required to withhold 10% of any distribution in excess of
its current and accumulated earnings and profits to the extent such shares
constitute "U.S. real property interests" under Section 897(c) of the Code.
Consequently, although the Company intends to withhold at a rate of 30% on the
entire amount of any distribution to a Non-U.S. Shareholder, to the extent that
the Company does not do so, any portion of a distribution not subject to 30%
withholding will be subject to 10% withholding.
For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges of U.S. real property interests
will be taxed to a Non-U.S. Shareholder under the provisions of the Foreign
Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA,
distributions attributable to gain from sales of United States real property
interests are taxed to a Non-U.S. Shareholder as if such gain were effectively
connected with a United States business. Non-U.S. Shareholders thus would be
taxed at the normal capital gain rates applicable to U.S. Shareholders (subject
to applicable alternative minimum tax and a special alternative minimum tax in
the case of nonresident alien individuals). Distributions subject to FIRPTA also
may be subject to the 30% branch profits tax in the hands of a corporate
Non-U.S. Shareholder not entitled to treaty relief or exemption. The Company is
required to withhold 35% of any distribution that is designated by it as a
capital gains dividend. The amount withheld is creditable against the Non-U.S.
Shareholder's U.S. tax liability.
Gain recognized by a Non-U.S. Shareholder upon a sale of shares generally
will not be taxed under FIRPTA if the Company is a "domestically controlled
REIT," defined generally as a REIT in which at all times during a specified
testing period less than 50% in value of the stock was held directly or
indirectly by foreign persons. The Company is currently a
"domestically-controlled REIT" and, therefore, the sale of Common Stock will not
be subject to taxation under FIRPTA. However, because the Company's shares are
publicly traded, no assurance can be given that the Company is or will continue
to be a "domestically-controlled REIT." In addition, a Non-U.S. Shareholder that
owned (actually or constructively under certain constructive ownership rules) 5%
or less of the Company's outstanding shares at all times during a specified
testing period will not be subject to tax under FIRPTA if such shares are
regularly traded on an established securities market (e.g., the NYSE, on which
the shares are currently traded). Furthermore, gain not subject to FIRPTA will
be taxable to a Non-U.S. Shareholder if (i) investment in shares is effectively
connected with the Non-U.S. Shareholder's United States trade or business, in
which case the Non-U.S. Shareholder will be subject to the same treatment as
U.S. Shareholders with respect to such gain, or (ii) the Non-U.S. Shareholder is
a nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and certain other conditions apply, in which
case the nonresident alien individual will be subject to a 30% tax on the
individual's capital gains. If the gain on the sale of shares were to be subject
to taxation under FIRPTA, the Non-U.S. Shareholder would be subject to the same
treatment as U.S. Shareholders with respect to such gain (subject to applicable
alternative minimum tax, a special alternative minimum tax in the case of
nonresident alien individuals, and the possible application of the 30% branch
profits tax in the case of corporate Non-U.S. Shareholders).
36
<PAGE> 101
OTHER TAX CONSEQUENCES
The Company, the Operating Partnership, the corporate subsidiaries of the
Company or the Company's shareholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they own
property, transact business or reside. The state and local tax treatment of the
Company and the Company's shareholders may not conform to the Federal income tax
consequences discussed above.
TAXATION OF HOLDERS OF PREFERRED STOCK, DEPOSITARY SHARES AND DEBT SECURITIES
If the Company offers one or more series of Preferred Stock or Depositary
Shares, or if the Operating Partnership offers one or more series of Debt
Securities, then there may be tax consequences for the holders of such
Securities not discussed herein. For a discussion of any such additional
consequences, see the applicable Prospectus Supplement.
PLAN OF DISTRIBUTION
The Company and the Operating Partnership may sell Securities to or through
underwriters, and also may sell Securities directly to other purchasers or
through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may receive
compensation from the Company, from the Operating Partnership or from purchasers
of Securities, for whom they may act as agents, in the form of discounts,
concessions, or commissions. Underwriters may sell Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions, or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agents. Underwriters, dealers, and agents
that participate in the distribution of Securities may be deemed to be
underwriters, and any discounts or commissions they receive from the Company or
the Operating Partnership, and any profit on the resale of Securities they
realize may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from the Company or the Operating Partnership will be
described, in the Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Stock which is listed on the NYSE. Any shares of Common
Stock sold pursuant to a Prospectus Supplement will be listed on such exchange,
subject to official notice of issuance. The Company or the Operating Partnership
may elect to list any series of Debt Securities, Preferred Stock or Depositary
Shares on an exchange, but neither is obligated to do so. It is possible that
one or more underwriters may make a market in a series of Securities, but will
not be obligated to do so and may discontinue any market making at any time
without notice. Therefore, no assurance can be given as to the liquidity of the
trading market for the Securities.
Under agreements the Company and the Operating Partnership may enter into,
underwriters, dealers, and agents who participate in the distribution of
Securities may be entitled to indemnification by the Company or the Operating
Partnership against certain liabilities, including liabilities under the
Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, the Company or the Operating
Partnership in the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company or the
Operating Partnership, as the case may be, will authorize underwriters or other
persons acting as the Company's or the Operating Partnership's agents to solicit
offers by certain institutions to purchase Securities from the Company or the
Operating Partnership at the public offering price set forth in such Prospectus
Supplement pursuant to delayed delivery contracts ("Contracts") providing for
payment and delivery on the date or dates stated in such Prospectus Supplement.
Each Contract will be for an amount not less than, and the aggregate principal
amount of Securities sold pursuant to Contracts shall be not less nor more than,
the respective amounts stated in the applicable Prospectus Supplement.
Institutions with whom Contracts, when authorized, may be made
37
<PAGE> 102
include commercial savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions but
will in all cases be subject to the approval of the Company or the Operating
Partnership, as the case may be. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and (ii)
if the Securities are being sold to underwriters, the Company or the Operating
Partnership, as the case may be, shall have sold to such underwriters the total
principal amount of the Securities less the principal amount thereof covered by
Contracts.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of the Company for the year ended
December 31, 1996 and incorporated in this Prospectus by reference to the Annual
Report on Form 10-K of the Operating Partnership for the year ended December 31,
1996 have been so incorporated in reliance on the reports of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements of Columbus Realty Trust for the year
ended December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996, included in the Current Report on Form 8-K dated
September 17, 1997 filed by Post Properties, Inc., and the Current Report on
Form 8-K dated September 17, 1997 filed by Post Apartment Homes, L.P., have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements have been incorporated herein by reference in reliance upon
such reports given the authority of such firm as experts in accounting and
auditing.
LEGAL MATTERS
The legality of the Securities will be passed upon for the Company and the
Operating Partnership by King & Spalding, Atlanta, Georgia. Herschel M. Bloom, a
member of King & Spalding, is a director of the Company.
38
<PAGE> 103
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PRICING SUPPLEMENT, THE ACCOMPANYING
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY
THIS PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE OPERATING PARTNERSHIP OR THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PRICING SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE OPERATING PARTNERSHIP SINCE THE
DATE HEREOF. THIS PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRICING SUPPLEMENT
Pricing Supplement Summary............... PS-3
Use of Proceeds.......................... PS-12
Capitalization........................... PS-12
Ratio of Earnings to Fixed Charges....... PS-12
Business and Communities................. PS-13
Management............................... PS-18
Description of the MOPPRS................ PS-19
Certain United States Federal Income Tax
Considerations......................... PS-24
ERISA Considerations..................... PS-27
Supplemental Plan of Distribution........ PS-27
PROSPECTUS SUPPLEMENT
Risk Factors............................. S-2
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends.............. S-3
Description of Notes..................... S-4
Special Provisions Relating to Foreign
Currency Notes......................... S-23
Certain United States Federal Income Tax
Considerations......................... S-26
Plan of Distribution..................... S-35
Legal Matters............................ S-36
PROSPECTUS
Available Information.................... 2
Incorporation of Certain Documents by
Reference.............................. 2
The Company and the Operating
Partnership............................ 3
Use of Proceeds.......................... 3
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends.............. 4
Description of Debt Securities........... 4
Description of Common Stock.............. 15
Description of Preferred Stock........... 17
Description of Depositary Shares......... 23
Federal Income Tax Considerations........ 26
Plan of Distribution..................... 37
Experts.................................. 38
Legal Matters............................ 38
</TABLE>
======================================================
======================================================
$100,000,000
POST PROPERTIES LOGO
POST APARTMENT HOMES, L.P.
% MANDATORY PAR PUT
REMARKETED SECURITIES(SM)
("MOPPRS(SM)")
DUE MARCH , 2015
---------------------------
PRICING SUPPLEMENT
---------------------------
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY
SECURITIES LLC
MARCH , 1998
"MANDATORY PAR PUT REMARKETED
SECURITIES(SM)" AND "MOPPRS(SM)" ARE
SERVICE MARKS OWNED BY
MERRILL LYNCH & CO., INC.
======================================================
